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© His Majesty the King in Right of Canada as
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Canada’s Energy Future 2023: Energy Supply and Demand
Projections to 2050
PDF: NE2-12E-PDF
Paper: NE2-12E
ISSN 2562-069X (Print)
ISSN 2292-1710 (Electronic)
Key title: Canada's Energy Future
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© Sa Majesté le Roi de droit du Canada représenté
par la Régie de l’énergie du Canada 2023
Avenir énergétique du Canada en 2023 - Offre et demande
énergétiques à l’horizon 2050
PDF : NE2-12F-PDF
Papier : NE2-12F
ISSN 2562-0703 (version imprimée)
ISSN 2292-1729 (version électronique)
Titre clé : Avenir énergétique du Canada
Ce rapport est publié séparément dans les deux langues officielles.
On peut l'obtenir sur supports multiples, sur demande.CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORTable of Contents
Message from the Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . . 1
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Key Findings ................................................ 7
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Scenarios and Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Scenario premise ........................................... 20
Key assumptions ........................................... 26
Domestic climate policy ..................................... 26
Technology .............................................. 32
Crude oil and natural gas markets ............................. 34
Non-energy and land use, land-use change and forestry emissions
(LULUCF) ................................................ 38
Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Greenhouse gas (GHG) emissions .............................. 40
Canada’s GHG emission profile ............................... 40
GHG emission projections ................................... 42
Energy demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Residential and commercial .................................. 48
Industrial ................................................ 52
Transportation ............................................ 56
Primary energy demand ..................................... 61Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Electricity use ............................................. 64
Electricity production ....................................... 68
Energy use associated with electricity generation ................. 80
GHG emissions associated with electricity generation .............. 80
Oil and natural gas production ................................. 82
Crude oil ................................................ 82
Natural gas .............................................. 93
Natural gas liquids ......................................... 96
Energy use in the oil and gas sector ........................... 98
GHG emissions from the oil and gas sector ...................... 99
Hydrogen ................................................ 100
Hydrogen use ........................................... 101
Hydrogen production ...................................... 105
GHG emissions associated with hydrogen production ............. 106
Negative emissions ......................................... 107
Macroeconomics .......................................... 112
Access and Explore Energy Future Data . . . . . . . . . . . . . . . . . . . . . . . 113
About the CER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
About this Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Appendix 1: Domestic Climate Policy Assumptions . . . . . . . . . . . . . . 116
Appendix 2: Technology Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . 1261
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORMessage from the
Chief Executive Officer
As with past versions of Canada’s Energy Future, EF2023 explores how
possible energy futures might unfold for Canadians over the long term. In this
analysis, we begin with the end goal in mind: net-zero greenhouse gas (GHG)
emissions in 2050, and use our models to identify pathways to that point.
This is a different approach compared to past versions of the report where
we ran our models without restrictions, giving us insights into what a given
premise meant for the future.
In this report we explore a key question about Canada’s energy future: what
could reaching net-zero emissions by 2050 look like? This report is not a
prediction or a recommendation. It presents net-zero scenarios that can help
Canadians and policy makers see what a net-zero world could look like,
visualize the goal, and make informed decisions.I am proud to introduce the 2023 edition of
Canada’s Energy Future—our most ambitious report
yet, and the Canada Energy Regulator’s (CER) first
long-term outlook modeling net-zero by 2050
1
2
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORWe know that modeling the pathways to net-zero is a big challenge. Canada’s energy
system is complex and diverse, and how we produce and use energy in net-zero
world will be dramatically different than it is today. As you’ll read in this report, there
are some key components of this dramatically different world:
• Electricity becomes the cornerstone of the net-zero energy system. Devices
that we use every day that use fossil fuels are replaced by technologies that
use electricity. By 2050, technologies like electric vehicles and heat pumps
become commonplace.
• Low-carbon fuels like hydrogen and biofuels enable the energy system’s path
to net-zero, while carbon capture, utilization, and storage (CCUS) helps to
reduce emissions in many industries and the power generation sector.
• In a future with ambitious global climate action, global demand for fossil fuels
falls steeply, reducing oil and natural gas prices and Canadian production of
those commodities.
Uncertainty is inherent in all energy modeling exercises, including EF2023. And I am
sure not everyone will agree with the assumptions we made, nor our findings. To
address uncertainty about the future, we look at three scenarios in EF2023, two of
which explore net-zero. We also introduce five additional “What if” cases that ask
how changing some of our assumptions could impact Canada’s pathway to net-zero.
Our analysis is a means to understand what the future could look like under a certain
premise and set of assumptions. Relying on just one scenario to understand the
energy future implies too much certainty about what could happen.
3
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORIt is important to state that the pathway to net-zero is broader than the technical
and economic considerations that are the primary focus of EF2023. Policy
choices, the regulatory landscape, Canada's journey towards Reconciliation,
and societal preferences will each play a critical role in Canada’s energy future.
EF2023 is another step in the CER’s net-zero modeling journey. We continue to
learn and look forward to building on this report in the years to come.
The CER’s energy information work is a key part of our mandate as an
independent regulatory body. We do not develop government policies nor assess
the appropriateness of such policies, and the assumptions, narrative, and results
in EF2023 do not represent an official government position or policy direction.
Canada’s Energy Future contributes analysis and data to help inform Canada’s
energy dialogue for policy makers, the energy industry, and Canadians looking to
make informed energy choices.
Additional CER work is underway to support Canada’s emission reduction
ambitions, beyond the energy information we provide to Canadians. For example,
in collaboration with Natural Resources Canada, we are working to develop a
regulatory framework for renewable energy projects and power lines in Canada’s
offshore areas, an activity within the CER’s regulatory responsibility. We are also
working to make sure we are ready to oversee the transportation of hydrogen
by pipeline should such a facility be proposed within the CER’s jurisdiction.
In addition, we recently updated the GHG emissions and climate change
information that companies need to provide the CER when they are seeking
approval for a project.Consultation and collaboration have always been key to the success of the
Canada’s Energy Future series. Our work is better when we hear the perspectives
of others. Over the past 18 months we have sought advice and feedback from
experts within the federal government, particularly Natural Resources Canada
and Environment and Climate Change Canada. We also sought advice from
some of the top energy system modeling experts outside of government, both
in Canada and internationally. Finally, many experts responded to a technical
discussion paper and survey on our preliminary approach. I would like to thank all
of those who participated in these activities.
I would like to close by thanking the dedicated staff at the CER who contributed
to EF2023. This report is the CER’s latest contribution to the very important public
dialogue on what the pathways to net-zero might look like. I am excited to share
these scenarios with Canadians and look forward to the interesting discussions
ahead as we navigate Canada’s dynamic energy future.
Gitane De Silva,
Chief Executive Officer
Canada Energy Regulator4
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORExecutive Summary
Canada’s Energy Future 2023: Energy Supply and
Demand Projections to 2050 (EF2023) is the latest
long-term energy outlook from the Canada Energy
Regulator (CER).
The Canada’s Energy Future series explores how possible energy futures
might unfold for Canadians over the long term.
EF2023 focuses on the challenge of achieving net-zero greenhouse
gas (GHG) emissions by 2050. We explore net-zero scenarios to help
Canadians and policy makers see what a net-zero world could look like,
visualize the goal, and make informed decisions. Our scenarios cover all
energy commodities and all Canadian provinces and territories. We use
economic and energy models to do this analysis.
The results in EF2023 are not predictions about the future, nor
are they policy recommendations . Rather, they are the product of
scenarios based on a specific premise and set of assumptions.
Relying on just one scenario to understand the energy outlook implies too
much certainty about what could happen in the future.
5
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORIn EF2023 the end point of our analysis is predetermined: net-zero GHG emissions
by 2050. We then explore the question, “what might a pathway to that end point look
like?” Previous Canada’s Energy Future reports contained scenarios assessing how
varying levels of future climate action might affect Canada’s energy future. In those
reports, we did not limit the outcome of our scenarios based on a particular goal
or target.
EF2023 contains three scenarios: Global Net-zero, Canada Net-zero,
and Current Measures
In the Global Net-zero Scenario, we assume Canada achieves net-zero emissions by
2050. We also assume the rest of the world reduces emissions enough to limit global
warming to 1.5 Celsius (°C). In the Canada Net-zero Scenario, Canada also achieves
net-zero emissions by 2050, but the rest of the world moves more slowly to reduce
GHG emissions.
The pace of action outside of Canada to reduce GHG emissions is the main
difference between the net-zero scenarios in EF2023. As a trading nation, what
happens globally affects Canada’s economy and energy system. EF2023 focuses
on Canada, and we do not model global energy markets for the scenarios. Instead,
international factors relevant to the Canadian energy outlook, such as global prices
for crude oil and natural gas, and costs for many low-carbon technologies, are inputs
into our models. For some of these inputs, we rely on scenarios from the International
Energy Agency’s World Energy Outlook 2022.
The third scenario, the Current Measures Scenario, assumes limited action in Canada
to reduce GHG emissions beyond measures in place today and does not require that
Canada achieve net-zero emissions. In this scenario we also assume limited future
global climate action. Figure ES.1 shows the three scenarios.
6
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORFigure ES.1:
Illustration of the scenarios in EF2023
Five “What if” cases explore uncertainties on the path to net-zero
In addition to the three main scenarios in EF2023, you will find five cases in this report that ask: “What if?” There are many uncertainties on the pathway to net-zero.
These cases explore some of them by changing some key assumptions in EF2023 and showing what it could mean for Canada’s pathway to net-zero.
• What if the technologies to enable wide-scale adoption of hydrogen are more or less costly?
• What if small modular reactor (SMR) technology matures less quickly and is more costly?
• What if direct air capture (DAC) technology matures more quickly and is less costly?
• What if carbon capture, utilization, and storage (CCUS) technology does not mature as quickly and is more costly?
• What if electricity vehicle charging patterns result in higher peak electricity demand?7
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORIn our net-zero scenarios, the types of energy
Canadians use changes dramatically, including
using a lot more electricity.1Key Findings
The energy system in 2050 is very different than it is today in both of
our net-zero scenarios. We project that electricity becomes the most
important end-use energy source while the use of fossil fuels falls
significantly.
As shown in Figure ES.2, electricity, hydrogen, and biofuels make up a
much greater share of energy use. By 2050, we project that electricity
makes up 41% of total end-use energy consumption in the Global Net-
zero Scenario, and 39% in the Canada Net-zero Scenario, up from 17%
in 2021.
Hydrogen and biofuels emerge as important alternatives when
electricity may not be the best option to use, for example in heavy
freight transportation, aviation, or certain industrial processes. By 2050,
hydrogen makes up 12% of the energy mix and biofuels make up another
13% in the Global Net-zero Scenario.
With greater use of low and non-emitting energy sources, fossil fuel use
drops by 65% from 2021 to 2050 in the Global Net-zero Scenario, and by
56% in the Canada Net-zero Scenario. Fossil fuels still play an important
part in the energy system, with much of the fossil fuel in 2050 used at
industrial facilities outfitted with carbon capture technology, or for non-
energy use like asphalt, lubricants, and petrochemicals.
8
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORIn both net-zero scenarios, electricity use more than
doubles from 2021 to 2050, becoming the dominant
energy source in the energy system. This is because
many energy technologies we use today are steadily
replaced with devices that do the same things but
use electricity instead, like electric vehicles replacing
vehicles with internal combustion engines and heat
pumps replacing gas and oil furnaces. Many industries,
like iron and steel and manufacturing, also switch to
using more electricity. Finally, producing hydrogen
and capturing carbon dioxide (CO2) directly from the
atmosphere further increase electricity use later in the
projection period. In many instances, using electricity
is much more efficient than using fossil fuels, and
contributes to energy use decreasing by 22% from
2021 to 2050 in the Global Net-zero Scenario. Figure
ES.3 shows electricity use by sector in the Global Net-
zero Scenario.
While the types of fuels and technologies that shape
our energy system change considerably over the next
27 years, we project little change to the energy services
Canadians receive in both net-zero scenarios. Energy
services are not the energy or technologies we use,
but rather the things that energy enables us to do,
like heat our homes, travel from place to place, or run
equipment at a business. In 2050, Canadians continue
to comfortably heat and cool their homes, get around
how they prefer, and have their electricity needs met.Figure ES.2:
End-use energy use, by fuel, all scenarios
Figure ES.3:
Electricity use by sector, Global Net-zero Scenario
9
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORThe electricity system, which decarbonizes by 2035
and achieves net-negative emissions thereafter, is the
backbone of our net-zero scenarios.2
In both net-zero scenarios, the electricity sector transforms to
accommodate increasing electricity use while also rapidly decarbonizing
electricity production. By 2050 in both net-zero scenarios, more than
99% of electricity is from non- or low-emission technologies. We project
that wind, nuclear power, hydro, natural gas with CCUS, bioenergy with
carbon capture and storage (BECCS), and solar make up most of the
new generation growth over the projection period. Meanwhile, fossil fuel
generation without CCUS declines swiftly in response to increasingly strong
climate policies. The sector achieves net-zero emissions by 2035 and
becomes net-negative thereafter, a result of using BECCS.
Canada’s electricity system is regionally diverse, with the generation mix
largely determined by the resources available in each province or territory.
Many regions already have low-emitting electricity systems while others rely
more on fossil fuels. This variation means that the transition of the electricity
sector in each region is unique. Each region capitalizes on their own
resources and technological expertise to drive the electricity sector towards
net-zero.
10
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORAs shown in Figure ES.4, among all technologies, wind
contributes the greatest amount of new generation
by 2050, increasing ninefold from current levels in the
Global Net-zero Scenario. Wind increases it share of
generation in most provinces, with significant growth in
Alberta, Saskatchewan, British Columbia, and Ontario.
Generation from hydroelectricity, currently the largest
source of generation in Canada, increases by 26%
from 2021 to 2050, largely in provinces that currently
have significant hydroelectric resources already.
Natural gas-fired generation with CCUS becomes
a key source of power, particularly in Alberta and
Saskatchewan, where it makes up 13% of generation
in those provinces by 2050 in the Global Net-zero
Scenario. Nuclear generation, in the form of small
modular reactors (SMRs), increases significantly in the
2040 to 2050 period, with strong growth in Ontario and
deployment in many other provinces. Solar generation
increases steadily in both net-zero scenarios, making
up 5% of total generation by 2050.
We project that the electricity sector reaches net-zero
GHG emissions by 2035 in both net-zero scenarios
and, after that, becomes net-negative due the use of
BECCS. Negative emissions are achieved by burning
biomass to generate power and then capturing and
permanently storing the CO2 which would otherwise
be released naturally when the plants die. By 2050, net
emissions from the power sector are -36 megatonnes
(MT) in the Global Net-zero Scenario, as shown in
Figure ES.5.Figure ES.4:
Change in electricity generation from 2021 to 2050, by fuel, Global Net-zero Scenario
Figure ES.5:
GHG emissions from the electricity sector, by fuel, Global Net-zero Scenario
11
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOR
A portfolio of emerging technologies plays a key role
in our net-zero scenarios, especially to address more
difficult-to-reduce emissions.3
For some energy uses, switching to electricity is not possible or less
effective than other low- or non-emitting options. In both net-zero
scenarios, a portfolio of options plays important supporting roles,
including CCUS, hydrogen, negative emission technologies and nature-
based solutions.
As shown in Figure ES.6, CCUS is used to capture CO2 emissions from
the electricity, heavy industry, and oil and gas sectors in both net-zero
scenarios. By 2050, nearly 60 MT of CO2 are captured from these sectors
using CCUS in the Global Net-zero Scenario, which is about 9% of
Canada’s total GHG emissions in 2021. In the Canada Net-zero Scenario,
almost 80 MT of CO2 are captured by 2050, as there are more emissions
to be captured from the greater amount of fuel used to produce oil and
natural gas. 12
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORA robust hydrogen economy develops in both net-
zero scenarios. Most hydrogen is used in heavy freight
vehicles and in industries like chemicals, iron and
steel, and petroleum refining. We project hydrogen use
reaches over 8.5 MT by 2050 in the Global Net-zero
Scenario, or 12% of total energy use. We also assume
an additional 5 MT of hydrogen exports in the Global
Net-zero Scenario. Combined, Canada produces
nearly 14 MT of hydrogen by 2050 in the Global Net-
zero scenario, and slightly more in the Canada Net-
zero Scenario. We project hydrogen production from
a variety of technologies including using natural gas
as a feedstock along with CCUS, electrolysis using
water and electricity, and biomass-based processes,
as shown in Figure ES.7. Biomass-based hydrogen
production, when coupled with CCUS, results in net-
negative GHG emissions much like BECCS electricity
generation.
Despite all sectors significantly reducing emissions,
several sectors, like buildings, heavy industry and oil
and gas still have positive GHG emissions by 2050 in
both net-zero scenarios. Technologies like BECCS and
direct air capture, as well as nature-based solutions,
result in negative emissions by 2050 in both net-zero
scenarios, allowing emissions to balance to zero. By
2050 in the Global Net-zero Scenario, we project -36
MT net-negative emissions from the electricity sector,
-21 MT from hydrogen production using biomass with
CCUS, and -46 MT from direct air capture technology.
We also assume 50 MT of negative emissions from
land use, land-use change and forestry (LULUCF). Figure ES.6:
GHG emissions captured and permanently stored from fossil fuel combustion and
industrial processes, by sector, Global and Canada Net-zero scenarios
Figure ES.7:
Hydrogen production by technology, Global Net-zero Scenario
13
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORCanada’s oil and natural gas industry significantly
reduces its emissions in our net-zero scenarios and,
while production declines, the pace of global climate
action determines by how much.4
In both net-zero scenarios, GHG emissions from producing and
processing oil and natural gas decrease approximately 90% by 2050
compared to 2021. We project that increasingly strong climate policies
result in the adoption of CCUS, technological and process improvements
to dramatically reduce methane emissions, efficiency improvements,
and reliance on electricity where feasible. Ultimately, falling production in
response to much lower crude oil and natural gas prices in the Global
Net-zero Scenario is also a key driver of decreasing emissions.
In EF2023, the assumptions we make about the price of crude oil and
natural gas have the largest impact on our projections for Canadian oil
and gas production. Those prices are different in each scenario and are
driven by the pace of global climate action in the future and the resulting
amount of global demand for oil and natural gas.
In the Global Net-zero Scenario, we assume that global prices of oil
and natural gas fall steeply in response to declining global demand for
fossil fuels over the coming decades. In this scenario, we project that
Canadian crude oil production falls to 1.2 million barrels per day (MMb/d)
(194 thousand cubic metres per day (10³m³/d)) by 2050, 76% lower than
in 2022 as shown in Figure ES.8. As shown in Figure ES.9, natural gas
production falls by 68% over the same period, reaching 5.5 billion cubic
feet per day (Bcf/d) (156 million cubic metres per day (106m³/d)) by 2050.
14
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORIn the Canada Net-zero Scenario, prices fall less than in
the Global Net-zero Scenario, a result of less ambitious
global climate action, which results in higher global
demand for fossil fuels. We project that oil production
falls to 3.9 MMb/d (623 10³m³/d) by 2050, 22% lower
than in 2022, and natural gas production falls to
11.0 Bcf/d (310 106m³/d), 37% lower than in 2022.
In the Current Measures Scenario, where prices are
highest and future climate action is the least ambitious,
crude oil and natural gas production are the highest,
and so are emissions from the sector. Crude oil
production reaches 6.1 MMb/d (964 10³m³/d) by 2050,
20% higher than in 2022. Production of natural gas
grows to 21.5 Bcf/d (607 106m³/d), a 24% increase
over the projection period. Figure ES.8:
Crude oil production, all scenarios
Figure ES.9:
Natural gas production, all scenarios
15
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORReaching net-zero in our scenarios is driven by increasingly strong climate policies, in Canada and abroad.5
Both the Global and Canada Net-zero scenarios achieve net-zero GHG
emissions by 2050, a pre-determined outcome given the nature of the
analysis. Large emission reductions occur across the economy, with all
sectors contributing to achieving net-zero. Figure ES.10 shows emissions by
economic sector over the projection period in the Global Net-zero Scenario,
with positive emissions from some sectors being offset by negative emissions
in other sectors by 2050. The emission trends are similar in the Canada Net-
zero Scenario.
Continued increases in the strength of climate policies in Canada is the key
driver of emission reductions over the coming decades in both net-zero
scenarios. Our modeling shows that the pace of climate action in Canada will
need to continue to increase in the 2030 to 2050 period in order to achieve
net-zero emissions by 2050. This is in contrast to the Current Measures Scenario, where domestic climate
action does not increase beyond those measures currently in place today.
In that scenario, we project that GHG emissions are just 13% lower in 2050
than they were in 2021.
Action to reduce emissions globally also plays an important role in our
projections and what the paths to net-zero look like in our scenarios.
Depending on the scenario, we assume that climate policies around the
world drive technological innovation and create markets for low-carbon
technologies. This innovation and market development results in our
assumption of lower costs and better performance for low emission
technologies in the net-zero scenarios. In addition, global climate action also
factors into our projections by influencing the prices and exports of energy
we produce, which are key drivers of our scenarios.
Figure ES.10:
GHG emissions by economic sector, Global Net-zero Scenario16
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORIntroduction
Canada’s Energy Future 2023: Energy Supply
and Demand Projections to 2050 (EF2023) is
the latest long-term energy outlook from the
Canada Energy Regulator (CER).
The Canada’s Energy Future series explores how possible energy futures
might unfold for Canadians over the long term. We use economic and
energy models to explore how supply and demand for energy could
evolve. EF2023 is the CER’s first long-term outlook that models scenarios
where Canada reaches net-zero greenhouse gas (GHG) emissions by
2050. To model net-zero, we begin with the end goal in mind—net-zero
GHG emissions in 2050—and use our models to identify pathways to that
point. This is a different approach compared to past versions of the report
where we ran our models without restrictions, giving us insights into what
a given premise meant for the future.
17
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOREF2023 includes three scenarios, two that reach net-zero by 2050
EF2023 contains three scenarios. Two of these scenarios explore pathways
where Canada achieves net-zero emissions by 2050. In the Global Net-zero
Scenario, we assume Canada achieves net-zero emissions by 2050. We
also assume the rest of the world reduces emissions enough to limit global
warming to 1.5 Celsius (°C). In the Canada Net-zero Scenario, Canada also
achieves net-zero emissions by 2050 but the rest of the world moves more
slowly to reduce GHG emissions. The third scenario, the Current Measures
Scenario, assumes limited action to reduce GHG emissions beyond measures
in place today. In this scenario, we do not require our modeling results achieve
net-zero GHG emissions in Canada by 2050. We also assume limited future
global climate action.
Five “What if” cases explore uncertainties on the path to net-zero
In addition to the three main scenarios in EF2023, you will find five cases in
this report that ask: “What if?” There are many uncertainties on the pathway
to net-zero. These cases explore some of them by changing some key
assumptions in EF2023 and showing what it could mean for Canada’s
pathway to net-zero:
• What if the technologies to enable wide-scale adoption of hydrogen are
more or less costly?
• What if small modular reactor (SMR) technology matures less quickly
and is more costly?
• What if direct air capture (DAC) technology matures more quickly and is
less costly?
• What if carbon capture, utilization, and storage (CCUS) technology
does not mature as quickly and is more costly?
• What if electricity vehicle charging patterns result in higher peak
electricity demand?
18
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORWe have been working to improve our analytical tools over the past several years
to ensure we are up to the challenge of modeling net-zero. In late 2021, the
Honourable Jonathan Wilkinson, Minister of Natural Resources and the Minister
responsible for the CER, wrote a letter to the Chairperson of the CER’s Board of
Directors, Cassie Doyle. The letter requested that the CER undertake scenario
analysis consistent with Canada achieving net-zero emissions1 by 2050 as soon
as possible. Minister Wilkinson requested that the analysis:
• Include fully modelled scenarios of supply and demand for all energy
commodities in Canada.
• Be consistent with a global context in which the world achieves its Paris
Accord goal of limiting warming to 1.5°C.
• Consider relevant uncertainties, including future trends in low-carbon
technology and energy markets.
In her response, Chairperson Doyle welcomed the clarity provided by the
Minister’s letter and confirmed the next Canada’s Energy Future report will include
net-zero scenarios.
Consultation and collaboration have always been key to the Canada’s Energy
Future series. We sought advice and feedback from various experts throughout
the process, with the goal of validating our approach, assumptions, and
preliminary results to ensure EF2023 was technically robust and credible.
Federal departments, particularly Natural Resources Canada and Environment
and Climate Change Canada, played an important role in supporting the EF2023
analysis. While the CER is ultimately accountable for the content of EF2023, both
organizations supported our efforts by contributing substantial technical expertise
to the analysis. This collaboration ensured we had the best possible information
about the latest technologies and climate policy developments. The CER would
like to thank both organizations for their steadfast support in this endeavor.
1 The term “net-zero emissions” refers to a state where human-caused greenhouse gas (GHG) emissions are balanced by human-caused removals of GHGs from the atmosphere. GHG emissions include all gases that have heat-trapping
potential including carbon dioxide, methane, nitrous oxide, and various other gases. The Canadian Energy Regulator Act (CER Act) is the foundation for
nearly all that we do. Our Strategic Plan aligns with the mandate set out
in the CER Act and describes our mission as:
Regulating federal infrastructure to ensure safe and efficient delivery
of energy to Canada and the world, protecting the environment,
recognizing, and respecting the rights of the Indigenous Peoples,
and providing timely and relevant energy information and analysis.
The CER’s Board of Directors sets the strategic direction of
our organization. The Board of Directors supported the CER taking on
the challenge of modeling net-zero and provided strategic direction for
EF2023 throughout the exercise.
Core to the governance of our organization is a clear separation between
the operational and adjudicative functions of the CER. The CER’s
energy information work, which includes EF2023, is separate from the
adjudicative role of the Commission of the CER.
The Commission is responsible for making independent adjudicative
decisions and recommendations pursuant to the CER Act and other
legislation. The Commission considers each matter before it based on
the evidence parties submit in a proceeding. If a party wishes to rely on
material from EF2023 in a regulatory proceeding before the CER, it may
submit the material, just as it may submit any public document. Under
these circumstances, the submitting party in effect adopts the material
and that party could be required to answer questions pertaining to
the material.19
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORWe also sought advice from some of the top experts
outside of government, both in Canada and internationally.
Conversations with experts from organizations like the
International Energy Agency , Canadian Climate Institute,
and Institut de l’énergie Trottier were instrumental to
ensuring our approach was sound. We deeply appreciate
their advice.
The CER would also like to thank the many experts who
responded to a technical discussion paper and survey
on our preliminary approach in the Spring of 2022. This
early feedback on our project was important in setting the
direction of our work. A summary of that engagement is
on our website: Discussion Paper Results – A Summary of
What we Heard.
We base the projections in EF2023 on several important
assumptions, which we outline in the Scenarios and
Assumptions chapter. The Results chapter describes our
projections of the Canadian energy system to 2050 for
each of the three scenarios. Finally, the Access and Explore
Energy Futures Data chapter links to data, tools, and
interactive data visualizations that offer further insight into
EF2023.The Scope of EF2023
The projections in EF2023 are based primarily on economic and technical factors. This
includes economic activity, relevant policies, technology performance and costs, energy
costs, and the characteristics of various energy devices. Our models simulate the decision-
making of households and businesses based on those factors, which differ in each of our
scenarios.
The future of energy in Canada is, however, much broader than the economic and
technical factors driving the projections in EF2023 . Many of these are beyond the
scope of our analysis. These include evolving societal preferences, regulatory frameworks
and decisions, socioeconomic and affordability considerations, and the interaction between
the energy transition and Canada's journey towards Reconciliation.
An example would be the choices our model makes regarding the type of power generating
facilities that might be built to meet growing electricity demand in a given year. Our model
simulates what technology is likely to be chosen based on the upfront costs of various
options, future fuel costs, the impact on grid stability and any relevant policy considerations,
such as carbon pricing.
Given our assumptions, the model might suggest that building a wind farm, for example,
is the optimal outcome. However, the process to build such a facility would also depend
on additional factors like the results of regulatory decision-making and societal viewpoints
towards the project. We look at these factors in a general sense to assess if our projections
are reasonable, but these factors are not easily accounted for within our energy models or
study design, and largely fall outside the scope of EF2023.
Another aspect of Canada’s energy future outside the scope of EF2023 is how climate
change will impact the economy and energy system. Many of the impacts of climate change
on Canada today are described in Canada’s National Adaptation Strategy . These impacts
include more frequent and intense weather events, such as floods and heat waves, and
more gradual impacts such as permafrost thaw and coastal erosion. According to the
United Nations International Panel on Climate Change, global surface temperatures are
very likely to increase until at least 2050. This increase suggests that the impacts of climate
change on the energy system and economy will increase over the projection period. Our
models do not currently account for the wide range of climate impacts on the energy system
and economy.
20
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORThis chapter describes the premise of the
three scenarios in EF2023. We also describe
the assumptions2 of those scenarios.
2 In the context of EF2023, assumptions are inputs to our energy and economic models. Assumptions are often made when a factor is necessary for the analysis but are not something that is explicitly modelled.
Modellers often develop different sets of assumptions to generate different scenarios to understand how the energy future might look under different circumstances.Scenarios and Assumptions
Scenario premise
EF2023 analyzes three scenarios: the Global Net-zero Scenario, the Canada
Net-zero Scenario, and the Current Measures Scenario. All three scenarios
provide projections for all energy commodities and all Canadian provinces
and territories. We developed these scenarios to explore questions that are
relevant to the current Canadian energy dialogue, and to depict a range of
potential outcomes for the future.
21
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOR.
3 Net-zero GHG emissions means that Canada’s human-caused GHG emissions are balanced by human-caused removals of GHGs from the atmosphere.The premise of each scenario differs based on:
• The pace of climate action in Canada (including whether Canada must
achieve net-zero emissions by 2050).
• The pace of climate action in the rest of the world.
Both the Global and Canada Net-zero scenarios share the premise that the future
pace of climate action in Canada is consistent with Canada reaching net-zero3
greenhouse gas (GHG) emissions in 2050. Simply put, a key outcome of these
scenarios is predetermined: the level of GHG emissions in 2050. We then rely on
our energy and economy models to project a pathway for the energy system that
is consistent with this outcome.
In the Current Measures Scenario, there is no additional action to reduce GHGs
beyond those in place today. In this scenario, we do not require our modeling
results to achieve net-zero GHG emissions in Canada by 2050.
Global climate action affects Canada’s energy system
While the pace of domestic climate action is a key part of our scenarios, the
pace of action outside of Canada is also important. As a trading nation, what
happens globally affects Canada’s economy and energy system. EF2023 focuses
on Canada, and we do not model global energy markets. Instead, international
factors relevant to the Canadian energy outlook are assumptions, or inputs, that
we put into our models. Examples include global prices for crude oil and natural
gas, and costs for many low-carbon technologies.
While both net-zero scenarios share the same overall premise for achieving net-
zero in Canada, they differ based on the pace of global climate action. The Global
Net-zero Scenario is based on rapid global climate action: a pace consistent
with the world achieving the Paris Agreement goal of limiting warming to 1.5°C,
compared to pre-industrial levels. In the Canada Net-zero Scenario, the pace of
global climate action increases, but not as quickly. Global action in the Current
Measures Scenario is the slowest, with limited future global action beyond
policies in place today.
22
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORThe IEA’s global outlook is our primary source for
international assumptions
The primary source for international assumptions
in the Global and Canada Net-zero scenarios is the
International Energy Agency’s (IEA) World Energy
Outlook 2022 (WEO2022). Much like the CER’s
Canada’s Energy Future report, the IEA’s energy
outlook contains multiple long-term scenarios.
Published in October 2022, WEO2022 provides robust
and transparent projections. Relying on this analysis
for the international perspective in EF2023 ensures
our assumptions reflect recent international trends and
events, including the impact of the Russian invasion of
Ukraine on the global energy system.
While the IEA does model Canada, we do not rely
on those results in EF2023. Rather we use the IEA’s
projections of key global variables (such as the
global crude oil price) as assumptions in EF2023. We
describe the specific assumptions we draw from the
WEO2022 in the following section, Key Assumptions.
The Global Net-zero Scenario uses assumptions
from the IEA’s Net Zero Emissions by 2050
Scenario
In our Global Net-zero Scenario, we use the IEA’s
Net Zero Emissions by 2050 Scenario from WEO2022
as a source for many assumptions. This scenario is
described by the IEA as “consistent with limiting the
global temperature rise to 1.5°C without a temperature
overshoot (with a 50% probability).” As a result, the
scenario provides a good basis for ensuring our Global
Net-zero Scenario reflects rapid global action to reduce
GHG emissions. Figure A.1:
Scenarios and assumptions
23
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORThe principles of the IEA’s Net Zero Emissions by 2050 Scenario are summarized below:
• The uptake of all the available technologies and emissions reduction options is
dictated by costs, technology maturity, policy preferences, and market and country
conditions.
• All countries co-operate towards achieving net-zero emissions worldwide.
• An orderly transition across the energy sector, ensuring the security of fuel and
electricity supplies at all times.
The Canada Net-zero Scenario uses the IEA’s Announced Pledges Scenario for its
international assumptions
The Announced Pledges Scenario includes all the climate commitments and longer-term
targets made by governments around the world and assumes that they will be met in full and
on time. It covers net-zero by 2050 targets from Canada, the United States, the European
Union, and others. It also includes targets such as China’s goal to achieve carbon neutrality
before 2060, and India’s goal to reach net-zero by 2070.
The IEA’s Announced Pledges Scenario models increasing global climate action but is
unlikely to limit the global temperature rise to 1.5°C. According to the IEA, the global GHG
emissions resulting from this scenario would cause a temperature rise of around 1.7°C
by 2100. The premise of the Canada net-zero Scenario is aligned with the Announced
Pledges Scenario, with slower climate action outside of Canada than in the Global
Net-zero Scenario.
The Current Measures Scenario uses other sources for international assumptions
The international assumptions of the Current Measures Scenario are not from the WEO2022.
Instead, we review global scenario analysis produced by institutions, academia, industry,
private forecasters, and other relevant energy analysis, to develop our own assumptions.
Figure A.1 summarizes, at a high-level, the premise of the CER’s scenarios, and how they
relate to the assumptions in EF2023. The following section, Key Assumptions, describes the
assumptions in detail.
24
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOR
Different global scenarios modeling a net-zero world
For the Global Net-zero Scenario in EF2023, we rely on the IEA’s Net Zero Emissions by 2050 Scenario
as a source for international assumptions. We also rely on the IEA’s Announced Pledges Scenario in
our Canada Net-zero Scenario. The IEA is an autonomous inter-governmental organization within the
Organisation for Economic Co-operation and Development framework. Canada is one of 31 full member
countries of the IEA.
We chose this approach because the IEA’s global energy outlooks are among the most authoritative
analyses of the global energy system. The World Energy Outlook series is publicly available, transparent
about its assumptions and modeling approach, and provides significant context to accompany the
results. Nearly all of the variables we require for the international assumptions in our own modeling
exercise, such as crude oil and natural gas prices and technology costs, are readily available.
Other global outlooks were considered for EF2023
There are other energy outlooks that include global net-zero pathways that we considered but ultimately
did not use in EF2023. Choosing a different global scenario to rely on would have resulted in different
assumptions and outcomes in EF2023. Other global outlooks include the International Renewable Energy
Agency World Energy Transitions Outlook, BP Energy Outlook, Shell Scenarios, and Platts Future Energy
Outlooks.
In addition, as part of the Intergovernmental Panel on Climate Change’s (IPCC) Sixth Assessment Report
(AR6), authors collected and assessed model-based scenarios related to climate change mitigation.
The collection of these scenarios is referred to as the AR6 Scenarios Database4.
The IEA’s outlook compared to other global pathways to net-zero
WEO2022 provides a comparison between the 16 IPCC scenarios that are comparable with the Net Zero
Emissions by 2050 Scenario outcome of net-zero emissions from the global energy system. It indicates
that the IEA’s scenario has lower total energy demand (due to efficiency and electrification), higher wind
and solar electricity generation, and higher hydrogen consumption compared to many of the IPCC
scenarios. It also shows that the Net Zero Emissions by 2050 Scenario has lower levels of bioenergy,
carbon capture, utilization, and storage (CCUS), and energy-related carbon dioxide removals than
most of the IPCC scenarios. This does not indicate that the IEA, IPCC or any other scenarios are more
reasonable but rather that there is a range of global pathways consistent with limiting warming to 1.5°C.
4 The database, and a scenario explorer tool is hosted by the International Institute for Applied Systems Analysis.25
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOR
In addition to the three main scenarios in EF2023, you will find five cases in this report that ask: “What
if?” There are many uncertainties on the pathway to net-zero. These cases explore some of them by
changing key assumptions in EF2023 and showing what it could mean for Canada’s pathway to net-
zero:
• What if the technologies to enable wide-scale adoption of hydrogen are more or less costly?
• What if small modular reactor (SMR) technology matures less quickly and is more costly?
• What if DAC technology matures more quickly and is less costly?
• What if CCUS technology does not mature as quickly and is more costly?
• What if electricity vehicle charging patterns result in higher peak electricity demand?
We chose these questions based on the magnitude of the impact these factors could have on the
pathway to net-zero, and the level of uncertainty about their future. Why do we do scenario analysis?
EF2023, and most previous versions of the report,
contain multiple scenarios. Scenario analysis is
common in most long-term energy outlooks.
We do scenario analysis to explore uncertainties
facing the future of the energy system. The results
in EF2023 are not predictions about the future.
Rather, they are the product of scenarios based
on a premise and a certain set of assumptions.
Relying on just one scenario to understand the
energy outlook implies too much certainty about
what could happen in the future.
The scenarios in EF2023 explore uncertainty
about the future pace of climate action in Canada
and around the world. Past versions of the report
explored this and other areas of uncertainty using
scenarios. Past scenarios focused on energy
infrastructure developments, energy prices,
economic growth, and technological progress.
While scenarios provide a range of potential
outcomes for the future, they are also useful to
compare against one another. The similarities and
differences across the scenarios often provide
more useful insights than a single scenario in
isolation. 26
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORKey assumptions
Domestic climate policy
Domestic climate policies include laws, regulations, and programs put in place
by governments with the goal of reducing GHG emissions. Such policies can
affect the trajectory of Canada’s energy system. We make assumptions about the
climate policies we model in each scenario in EF2023. This section outlines some
of the key policies we include. Additional details are available in Appendix 1:
Domestic Climate Policy Assumptions.
Domestic climate policies in the Current Measures Scenario
Federal, provincial, and territorial climate policies that are currently in place are the
basis of the Current Measures Scenario. A policy is “in place” if it was enacted
prior to March 2023. We do not include announced policies that are not yet
implemented in the Current Measures Scenario.
The Canadian Net-Zero Emissions Accountability Act (CNZEAA) enshrines
in legislation the Government of Canada’s commitment to achieve net-zero
GHG emissions by 2050. The CNZEAA does not contain mechanisms that
directly influence the energy system like a more typical climate policy might,
rather it provides a framework of accountability and transparency to deliver on
Canada’s climate commitments. The Current Measures Scenario does not model
the CNZEAA.Carbon pricing in EF2023
Pricing carbon pollution is a key existing climate policy in Canada.
Canada’s carbon pricing approach allows provinces and territories to
choose their own system to price carbon pollution, or to rely on the
federal pricing system. The federal pricing system is comprised of two
parts, a regulatory charge on fossil fuels like gasoline and natural gas,
called the fuel charge, and a performance-based system for industries,
called the Output-Based Pricing System. Provinces and territories that
develop their own systems must meet minimum national stringency
criteria set by the federal government to ensure consistency and fairness.
In all instances, mechanisms for allocating proceeds from carbon pricing
continue as outlined by provinces or territories in their own systems, or
as defined in the federal system. All revenue from the federal carbon
pricing system is returned to the provinces and territories where they
are collected.
In all three scenarios, we assume that existing provincial and territorial
carbon pricing systems remain in place. Prices in all jurisdictions increase
from current levels by $15 per tonne of carbon dioxide equivalent (CO2e)
per year to reach $170 per tonne by 2030. We describe our assumptions
about how we model the cost of carbon between 2030 and 2050 later in
this section.
* All dollar figures throughout the report are in Canadian dollars unless stated otherwise.27
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORCarbon pricing and mitigating economic competitiveness risks
How we apply carbon pricing to large industrial emitters differs between scenarios.
This difference ensures consistency with each scenario premise. A key difference
between all three scenarios is the level of future climate action outside of Canada.
This can influence the design of carbon pricing systems. When some countries
are not moving as quickly as Canada to reduce GHG emissions, there is a risk that
some industries in those countries have an economic advantage over competitors
in Canada. There is also a risk some industrial facilities may move from Canada to
another country to avoid paying a price on carbon pollution; this migration is often
called carbon leakage.
The federal and provincial carbon pricing systems have mechanisms to mitigate
these risks. Under the federal system, this mechanism is referred to as the Output-
Based Pricing System. This performance-based system is designed to create a
financial incentive for industries to reduce emissions but also reduce the risk of
carbon leakage and adverse competitiveness impacts due to domestic carbon
pricing. Industry-specific benchmarks (output-based standards) are used to
determine the amount of carbon price owed. Instead of paying the fuel charge on
fuels that they use, facilities must provide compensation for emissions above an
emissions limit, calculated by multiplying relevant output-based standards and the
quantity of product produced.
We assume that in the Global Net-zero Scenario, the Output-Based Pricing System,
and provincial mechanisms to mitigate the risks of competitiveness impacts and
carbon leakage, phase out completely by 2050. In the Canada Net-zero Scenario,
slower global action implies that competitiveness could still be a concern. As a
result, we assume these mechanisms remain in place but the benchmarks for
determining the emission limits decline steadily over the projection period. In the
Current Measures Scenario, these emission limits remain at their current levels over
the projection period.
28
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORDomestic climate policies in the Global and Canada Net-zero scenarios
The Global and Canada Net-zero scenarios include all in-place federal, provincial,
and territorial climate policies. Both net-zero scenarios also include all announced
but not-yet-implemented policies, to the extent possible. We applied the following
criteria to determine whether an announced policy was included in our analysis:
• The policy was announced prior to March 2023.
• Sufficient details exist to model the policy.
The federal government made several key climate policy announcements that it is
working to implement, including:
• Clean Electricity Regulations – regulations to reduce GHG emissions from
the generation of electricity to help work towards a net-zero electricity
supply by 2035.
• Oil and Gas Emissions Cap – regulations to reduce GHG emissions from
the oil and gas sector at a pace and scale necessary to achieve Canada’s
2030 and 2050 climate targets.
• Light-duty Zero Emission Vehicle (ZEV) Sales Mandate – a mandatory
100% zero-emission vehicle sales target by 2035, including interim targets
of at least 20% by 2026 and at least 60% by 2030.
• A 75% reduction in oil and gas sector methane emissions relative to 2012
levels by 2030 – regulations and other measures needed to achieve at
least a 75% reduction in methane emissions from the oil and gas sector
from 2012 levels by 2030.
• Investment Tax Credit for Clean Hydrogen – a tax credit to support
investments in clean hydrogen productionAssumptions regarding future policies in EF2023 are meant to
be illustrative and represent a stylized future policy environment.
Our assumptions are not policy recommendations for governments.
In developing future policies, governments will consider economic,
social, legal, jurisdictional (both within and outside of Canada),
and other factors.These and other announced but not-yet-implemented policies are modeled in
both net-zero scenarios. Final details of some of these policies were not available
at the time of analysis. We include these policies by relying on assumptions about
those policies as necessary.
In some cases, we strengthen existing and announced policies beyond what
is specified in a policy or regulation. For example, the Clean Fuel Regulations
require the emission intensity of certain fuels for sale in Canada to decline by a
specific rate until 2030. We continue emission intensity reductions as if the policy
continued to increase in strength beyond 2030.
Finally, to ensure the Global and Canada Net-zero scenarios achieve net-zero
by 2050, we rely on some hypothetical policies in the 2030 to 2050 period. The
following section, Modeling Net-zero and Future Climate Policy Assumptions
describes this approach.
Table A.1 describes the key policy assumptions in EF2023. Further details on
these and other policies is available in Appendix 1: Domestic Climate Policy
Assumptions.29
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORTable A.1:
Overview of domestic climate policy assumptions
Policies currently in place
These policies are the basis of the Current Measures Scenario and are also included in the Global and Canada Net-zero scenarios.
Policy Description
Carbon pricing Current provincial and territorial pricing systems, as well as the federal carbon pricing backstop.
Methane regulations Federal and provincial regulations applying to methane, including federal regulations for the upstream oil and gas sector
aimed at reducing emissions by 40% from 2012 levels by 2025.
Investment tax credit for carbon capture,
utilization, and storageA federal investment tax credit for CCUS projects that permanently store captured carbon dioxide (CO2) in geological
storage or in concrete.
Investment tax credit for clean technologies A federal investment tax credit for electricity generation systems, stationary electricity storage systems, low-carbon heat
equipment, and industrial zero-emission vehicles and related infrastructure.
Clean fuel regulations A performance-based supply standard requiring suppliers of gasoline and diesel to reduce the lifecycle carbon intensity of
their fuels.
Coal phase-out Traditional coal-fired generation is phased out of electricity generation by 2030.
Energy efficiency regulations Current federal and provincial regulations on energy efficiency for appliances, heating and cooling equipment, building
codes, and vehicles.
Zero-emissions vehicle subsidies Current federal and provincial subsidies on zero-emission vehicles.
Renewable fuels Current provincial and federal regulations for blending biodiesel, ethanol, hydrogenation-derived renewable diesel, and
renewable natural gas.
Announced policies that are not yet implemented
These policies are included in the Global and Canada Net-zero scenarios but not the Current Measures Scenario.
Policy Description
Clean electricity regulations Federal regulations to reduce GHG emissions from the generation of electricity to help work towards a net-zero electricity
supply by 2035.
Zero-emission vehicle mandate A federal zero-emission vehicle (ZEV) mandate is introduced in 2025, rising to 100% of new light duty vehicle sales by
2035 in the provinces. New heavy duty vehicle sales rise to 100% ZEV where feasible by 2040.
National net-zero emissions building strategy Increase energy efficiency of new and existing buildings out to 2050.
Oil and gas emissions cap Regulations to reduce GHG emissions from the oil and gas sector at a pace and scale necessary to achieve Canada’s
2030 and 2050 climate targets.
Methane regulations Methane emissions from the upstream oil and gas sector are reduced by 40% by 2025 from 2012 levels and 75% by
2030.
Carbon pricing See the following section, “Modeling net-zero and Future Climate Policy Assumptions.”30
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORModeling net-zero and future climate policy assumptions
A requirement of the Global and Canada Net-zero scenarios is that Canada
reaches net-zero GHG emissions by 2050. In the net-zero scenarios in
EF2023, we begin with the end goal in mind: net-zero GHG emissions
in 2050, and use our models to identify a pathway to that point. This is a
different approach compared to past versions of this report. Previously, we ran our
models without restrictions, giving us insights into what a given premise and set of
assumptions meant for the future.
5 Another approach to modeling net-zero pathways is referred to as optimization. This approach uses models to compute an optimal pathway to a pre-determined outcome (such as net-zero emissions by 2050). Canadian Energy
Outlook 2021 published by the Institut de l’énergie Trottier is an example of modeling Canada’s energy system using optimization techniques.To reach net-zero, we take an iterative approach
This approach5 begins with running the Energy Futures Modeling System with an
initial set of assumptions. Once complete, we look at the resulting GHG emissions
in 2050. If our projections do not result in net-zero emissions by 2050, we alter
our hypothetical future climate policy assumptions and re-run our models. With
each additional model run, we alter the policy assumptions, resulting in higher or
lower GHG emissions. We repeat this process until the outcome of the model is
consistent with net-zero GHG emissions by 2050. Other assumptions, such as
those on technologies, international markets, and behaviour, remain constant.
Figure A.2 shows this process.
Figure A.2:
Simplified iterative approach to modeling net-zero in the Global and Canada Net-zero scenarios
31
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOR
The main driver of our models reaching a net-zero emissions outcome
is what we refer to as the “aggregate cost of carbon.” The aggregate
cost of carbon represents the hypothetical suite of policies,
regulations, and programs, that we assume in the 2030 to 2050
period. In practical terms, to implement this in the Energy Futures
Modeling System, we rely on a hypothetical economy-wide carbon
price to represent the aggregate cost of carbon. This choice is solely
for technical modeling purposes. It is likely that future climate policy
in Canada, like it is today, will be a diverse mix of tools to reduce
emissions. Our assumptions are not policy recommendations
for governments . In addition, these assumptions are not an
estimate of what future carbon prices are necessary to achieve
net-zero, but instead a modeling technique we use to explore
potential net-zero outcomes.
The aggregate cost of carbon resulting from the iterative process
shown in Figure A.2 increases steadily from $0 per tonne of carbon
dioxide equivalent (CO2e) in 2030 to 2022$330 per tonne of CO2e
in 2050 in inflation adjusted terms in the Global Net-zero Scenario,
and to 2022$380 per tonne of CO2e in the Canada Net-zero
Scenario. In both net-zero scenarios, this is in addition to the federal
backstop carbon price of $170 per tonne of CO2e in 2030 to 2050
(or 2022$95 per tonne of CO2e in inflation-adjusted terms by 2050),
as well as all in-place federal, provincial, and territorial climate policies
and the announced but not-yet-implemented policies that we model
in our analysis.32
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORTechnology
To model Canada’s energy system, we make assumptions about a wide variety
of technologies that use or produce energy. These range from well-established
technologies (like refrigerators, furnaces, and wind turbines) to those under
development or not yet widely used (like heat pumps, small modular reactors
(SMRs), and DAC processes). We make assumptions about the current and
future costs, performance, and efficiency of technologies.
Energy technology development and the pace of climate action are related
Climate policies drive technological innovation and create markets for low-
carbon technologies. This innovation and market development can result in
lower costs and better performance. The difference in global climate action in
our three scenarios means we make different assumptions about technology in
each scenario.
The Global and Canada Net-zero scenarios assume continued technological
progress, including commercialization of many emerging technologies that can
support a net-zero future. Both scenarios rely on the IEA’s scenarios for many
of the technology assumptions, where clean energy technologies generally
get progressively less costly over time. The pace of this cost decline varies
by scenario. In the IEA’s analysis, the more households and businesses use a
technology, the more its cost tends to decline. This means that technology costs
decline the most in the Global Net-zero Scenario because it draws its technology
assumptions from the IEA’s Net Zero Emissions by 2050 Scenario, which is the
most ambitious scenario in WEO2022. The cost declines in the Canada Net-zero
Scenario are somewhat slower, as that scenario relies on the IEA’s Announced
Pledges Scenario, which has somewhat slower global climate action. The Current
Measures Scenario has the slowest pace of technological development.
Figure A.3 provides an example of the cost declines for some of the technologies
in the Global Net-zero Scenario.Figure A.3:
Capital cost trends for select technologies, Global Net-zero Scenario
33
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORCritical minerals are key to low-carbon energy deployment
All assumptions in EF2023 have a degree of uncertainty associated with them.
How much different technologies eventually cost will likely differ from what we
assume in this report. A key factor affecting many low-carbon technologies is the
cost of inputs to manufacture those technologies, including critical minerals. In its
WEO2022 report, the IEA notes that the increasing use and importance of critical
minerals could become a bottleneck for clean energy deployment. For more
information on the impact of critical minerals on the Canadian energy outlook, see
the text box: “Critical Minerals and the Energy Transition” in EF2021, or the CER’s
Market Snapshot “Critical Minerals are Key to the Global Energy Transition”.
Table A.2 describes many of the technology assumptions in EF2023 in all
three scenarios. Further details on these and other technologies is available in
Appendix 2: Technology Assumptions.
Table A.2:
Overview of technology assumptionsa
Technology Global Net-zero Canada Net-zero Current Measures
CCUS Capture costs are different by industry and
range from $45-200/tCO2 by 2030 and $30-
160/tCO2 from 2030-2050.Capture costs are different by industry and
range from $45-200/tCO2 by 2030 and
$ 30-160/tCO2 from 2030-2050.Capture costs are different by industry and
range from $45-200/tCO2 through the projection
period.
Battery-electric
passenger vehiclesCost declines 30% by 2030 and 38% by 2050. Cost declines 28% by 2030 and 36% by 2050. Cost declines 26% by 2030 and 33% by 2050.
Medium and heavy-
duty freight vehiclesBattery-electric and fuel cell truck costs fall
steadily, approaching parity with diesel vehicles
in 2035-2050 period.Battery-electric and fuel cell truck costs fall
steadily, approaching parity with diesel vehicles
in 2035-2050 period.Battery-electric and fuel cell truck costs remain
near current levels.
Heat pumps Cost declines 15% by 2030 and 40% by 2050. Cost declines 13% by 2030 and 34% by 2050. Cost declines 7% by 2030 and 20% by 2050.
Wind electricity Capital cost declines 13% by 2030 and 17% by
2050.Capital cost declines 10% by 2030 and 16% by
2050.Capital cost declines 9% by 2030 and 15% by
2050.
Solar electricity Capital cost declines 44% by 2030 and 60% by
2050.Capital cost declines 44% by 2030 and 60% by
2050.Capital cost declines 40% by 2030 and 57% by
2050.
Direct Air Capture
(DAC)Capture cost declines to $330/tCO2 by 2035
and $230/tCO2 by 2050.Capture cost declines to $350/tCO2 by 2035
and $250/tCO2 by 2050.Capture cost remains at $400-450/tCO2 over
projection period.
Hydrogen electrolyzer Capital cost declines 80% by 2030 and 84% by
2050.Capital cost declines 74% by 2030 and 82% by
2050.Capital cost declines 62% by 2030 and 70% by
2050.
a Cost reductions are relative to 2021, and dollar figures are adjusted for inflation.
34
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORCrude oil and natural gas markets
Global crude oil and natural gas prices are a key driver of the Canadian energy system
and are determined by supply and demand factors beyond Canada’s borders. The CER
does not model international energy markets. Instead, we rely on other sources of
information, including the analysis of others, to develop assumptions on factors like
crude oil and natural gas prices. As we describe later in this section, we rely on IEA’s
WEO2022 projections for key inputs in both of our net-zero scenarios.
Global crude oil prices were volatile over the past few years
After averaging around US$60 per barrel (bbl) from 2017 to 2019, the annual average
price for Brent crude oil fell to US$42/bbl in 2020. This price decreased largely because
the COVID-19 pandemic reduced business activity, commuting, shipping, and travel,
reducing global demand for oil-based products like gasoline, diesel, and jet fuel.
Beginning in 2021, prices began to steadily increase, as consumption of these products
rebounded when many countries eased pandemic restrictions. Meanwhile, oil producers
were slow to increase investment from 2020 levels, meaning there was less new oil
production to supply growing demand. Price increases accelerated in early 2022 when
Russia invaded Ukraine and countries around the world sanctioned Russia’s energy
exports, increasing demand for non-Russian oil. The price for Brent crude oil rose above
US$100/bbl for several months in 2022 before declining to closer to US$80/bbl late in
the year.
North American natural gas prices followed similar trends to crude oil
From 2017 to 2019, the Henry Hub natural gas price was stable around US$3.00 per
million British thermal units (MMBtu). With the onset of the COVID-19 pandemic, the
price fell, averaging just over US$2.00/MMBtu in 2020. Like crude oil, natural gas prices
increased through 2021 and 2022, at first because many countries eased pandemic
restrictions and then because natural gas producers were slow to ramp up investment
levels as demand increased. Then Russia invaded Ukraine, increasing demand for
non-Russian natural gas around the world, especially liquefied natural gas (LNG) from
markets like the United States. Henry Hub natural gas prices averaged US$8.81/MMBtu
in August 2022, the highest monthly average since July 2008. By the end of 2022,
natural gas prices decreased to less than US$6.00/MMBtu. In the first three months of
2023, gas prices continued to fall, trading closer to US$2.00/MMBtu in March.
35
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORInternational crude oil and natural gas prices
We rely on the IEA’s WEO2022 for the global oil and natural gas price
assumptions in the two net-zero scenarios in EF2023. The IEA’s Net Zero
Emissions by 2050 Scenario is the source of price assumptions for our
Global Net-zero Scenario. The IEA projects crude oil prices to decrease to
2021US$35/bbl in inflation-adjusted terms by 2030 and 2021US$24/bbl in
2050. In the IEA’s scenario, global crude oil consumption falls from 94.5 million
barrels per day (MMb/d) (15.0 10³m³/d) in 2021, to 75.3 MMb/d (12.0 10³m³/d)
in 2030 and 22.8 MMb/d (3.6 10³m³/d) in 2050. Much of this drop is because of
the electrification of transportation; all global passenger vehicle sales are electric
vehicles by 2035 in the IEA’s Net Zero Emissions by 2050 Scenario. By 2050,
three quarters of remaining global crude oil use is for products like petrochemical
feedstock, lubricants, and asphalt, where the oil is not combusted.
In the Net Zero Emissions by 2050 Scenario, the IEA projects that North
American natural gas prices fall from 2021US$6.60/MMBtu in 2021 to
2021US$2.00/MMBtu in 2030 and 2021US$1.80/MMBtu in 2050, in inflation-
adjusted terms. Global demand for natural gas in this scenario falls by 20%
from 2021 to 2030, and by over 70% by 2050. The steepest reductions in the
global use of natural gas occurs in electricity generation and heating of buildings.
Producing low-carbon hydrogen from natural gas makes up half of the remaining
consumption in 2050.
The IEA’s WEO2022 Announced Pledges Scenario is the source of global price
assumptions for our Canada Net-zero Scenario. In the Announced Pledges
Scenario, the drop in fossil fuel consumption is not as dramatic as in the Net Zero
Emissions by 2050 Scenario. Global crude oil consumption declines 40% from
2021 to 2050, and natural gas falls 37% over the same period. As a result, the
price of crude oil decreases to 2021US$64/bbl in 2030 and 2021US$60/bbl
in 2050 in inflation-adjusted terms in the IEA’s Announced Pledges Scenario.
The price of natural gas decreases to 2021US$3.70/MMBtu in 2030 and
2021US$2.60/MMBtu in 2050.EF2023 uses IEA price projections to model crude oil and natural
gas production
While we rely on the IEA’s crude oil and natural price projections, we do not use
the IEA’s projected production of Canadian crude oil and natural gas. Instead, we
use the IEA’s prices (adjusted to reflect local Canadian prices) in our models to
project crude oil and natural gas production (which we describe in the following
chapter, “Results”).
We base our global price assumptions in the Current Measures Scenario on a
review of price projections by various other organizations. In this scenario, we
assume the Brent crude oil price is 2021US$75/bbl by 2030 and stays at that
level through the projection period. We assume the Henry Hub natural gas price
reaches 2021US$3.75/MMBtu in 2030, after which the price increases slowly,
reaching 2021US$4.40/MMBtu in 2050.
Figures A.4 and A.5 show the prices we assume for crude oil and natural gas for
all three scenarios in EF2023. For the Global and Canada Net-zero scenarios, we
adjust the IEA’s WEO2022 prices to align with key global price benchmarks used
in the Canada’s Energy Future series: Brent, the primary global benchmark price
for crude oil, and Henry Hub, a key North American benchmark price for natural
gas. We also interpolate annual prices from IEA’s projections, which are only
available for the years 2030 and 2050. 36
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORDomestic crude oil and natural gas prices
While international prices are a key driver of Canadian crude oil prices
(like Western Canada Select (WCS) for heavy crude oil), local factors are also
important in determining the prices Canadian crude oil producers receive.
The difference, or “differential,” in prices between local markets and international
prices depends on many things, such as whether pipelines have enough capacity
to ship all exports, issues in downstream markets, and quality differences
between different types of crude oil (like the chemical and compositional
differences between light, sweet crude oil, and heavy, sour crude oil).
In all three scenarios, the difference between West Texas Intermediate (WTI), a
key North American crude benchmark, is US$2.50/bbl lower, in inflation-adjusted
terms, than Brent over the entire projection period. We also assume that the
difference between WTI and WCS remains at its historical level over the projection
period at US$12.50/bbl in the Current Measures and Canada Net-zero scenarios.
In the Global Net-zero Scenario, this differential begins to narrow slightly starting
in 2035, reaching US$10/bbl in 2050. We alter the differential in this scenario to
account for continued demand of heavier refined products, like asphalt.
Figure A.4:
Brent crude oil price assumptions, all scenariosFigure A.6:
Canadian LNG export volume assumptions, all scenariosFigure A.5:
Henry Hub natural gas price assumptions, all scenarios
37
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORLiquefied natural gas
We make assumptions about the amount of natural gas that Canada exports
as LNG in all three scenarios (Figure A.6). Unlike many other industries, we
do not use a model to project future LNG production. This is because the
sector consists of a few large potential projects, each with their own unique
circumstances. Instead, we rely on Asian natural gas prices in the WEO2022 to
assess the economic viability of Canadian LNG exports, from which we develop
our assumptions.
We assume LNG production is the lowest in the Global Net-zero Scenario
In the Global Net-zero Scenario, we assume exports of LNG from the first phase
of the LNG Canada project begin in 2025 and ramp up to 1.7 billion cubic feet
per day (Bcf/d) 49.0 106m3/d) in 2026. This is the volume of natural gas that
would be exported, accounting for natural gas used for fuel at the LNG facility.
We also assume the Woodfibre LNG project begins production in 2028 and
increases to full capacity of just below 0.3 Bcf/d (8.5 106m3/d) in 2029. Total
exports in the Global Net-zero Scenario reach 2 Bcf/d (56.6 106m3/d) in 2029 and
remain at that level until 2044. In 2045, LNG production begins to fall in response
to much lower global LNG demand, reaching 0.3 Bcf/d (8.5 106m3/d) by 2046
and staying at that level to 2050.
LNG exports increase to 2030 and then level off in the Canada Net-zero
Scenario
In addition to the LNG exports in the Global Net-zero Scenario, we assume the
Canada Net-zero Scenario also includes the second phase of the LNG Canada
project beginning in 2029. Total LNG exports reach 3.8 Bcf/d (108.2 106m3/d) in
in 2030 and continue at that level throughout the projection period. We assume
higher LNG exports in the Canada Net-zero Scenario because of higher natural
gas prices and global LNG trade in the IEA’s Announced Pledges Scenario.
LNG exports are the highest in the Current Measures Scenario
LNG Exports reach 4.6 Bcf/d (131.4 106m3/d) in 2034 and staying at that level
to 2050 in the Current Measures Scenario. In all three scenarios, we assume all
LNG exports originate from Canada’s west coast. Future LNG development is
uncertain and could be significantly different than implied by these assumptions.Implications of Russia’s invasion of Ukraine
In early 2022, Russia, a major exporter of oil and natural gas to world
energy markets, invaded Ukraine. Nations around the world condemned
the invasion and responded by sanctioning Russian energy exports.
For example, much of Europe, which relied heavily on Russian natural
gas, restricted imports. In addition, transportation of Russian natural
gas to Europe was severely curtailed when the Nord Stream pipeline
– two offshore pipelines that connect Russia to Germany – reduced
flows in July 2022, and then was shut down entirely in September 2022
because of sabotage. These events resulted in an immediate surge in
global demand for non-Russian oil and natural gas that could last for
several years.
European countries have also responded by accelerating plans to shift
to less reliance on oil and natural gas. This acceleration includes new
policies to speed up the adoption of electric vehicles, enable bigger
and quicker buildouts of renewable energy, delay the retirement of
some nuclear power plants, and increase energy efficiency. These are
in addition to accelerating climate policy action around the world. In
the WEO2022, the IEA projects that policies in place around the world
today could cause fossil fuel demand to peak in the mid-2020s and then
decline.
These developments result in additional uncertainty in modeling
Canada’s energy system. Canada is major exporter of oil and natural
gas, and the global market is undergoing significant changes. For a
detailed discussion of how these events could impact the global energy
outlook, please see “The global energy crisis” in the IEA’s WEO2022.38
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORNon-energy and land use, land-use change and forestry emissions (LULUCF)
The analysis in EF2023 focuses on energy production, processing, transportation, and consumption in Canada, which currently represents approximately 80% of
Canada’s GHG emissions (mostly from fossil fuel combustion).
To depict a net-zero outcome for Canada, however, our analysis requires projections for all GHG emission sources and sinks. There are several human-caused GHG
emission sources and sinks not directly linked to the energy system. While we do model non-energy emissions from industrial processes and product use, we do not
model other non-energy GHG emissions in Canada. As a result, we make assumptions about them in our scenarios. Table A.3 describes the non-energy emissions we
do not model, and the assumptions we make in our scenarios.
Table A.3:
Non-energy emission assumptions, all scenarios
Emissions source Description6Assumption
Agriculture Emissions related to the production of crops and livestock
(excludes on-farm fuel use). Agriculture emissions were 54
MT in 2021.Our projections of agricultural sector output were the primary driver of the agriculture
emission assumptions. Some potential emissions reductions from adoption of innovative
agriculture practices are included in the net-zero scenarios.
Current Measures Scenario: 55 MT in 2030 and 59 MT by 2050
Global and Canada Net-zero scenarios: 51 MT in 2030 and 41 MT by 2050
Waste Emissions from the treatment and disposal of solid and
liquid wastes, and waste incineration. Waste emissions were
21 MT in 2021. Our projections of the number of households were the primary driver of the waste
emission assumptions. We account for the proposed regulations on landfill methane in
the assumptions of the net-zero scenarios.
Current Measures Scenario: 22 MT in 2030 and 23 MT by 2050
Global and Canada Net-zero scenarios: 13 MT in 2030 and 11 MT by 2050
Land use, land-use
change and forestry
(LULUCF)Net emissions associated with Canada’s managed lands,
such as forests and cropland. Land use, land-use change
and forestry emissions were negative 17 MT in 2021. Our assumptions for land use, land-use change and forestry emissions are based
on a review of various studies and projections of others, such as recent studies by
Environment and Climate Change Canada, Canadian Climate Institute, and Institut de
l’énergie Trottier.
Current Measures Scenario: -13 MT in 2030 and beyond
Global and Canada Net-zero scenarios: -30 MT in 2030 and -50 MT by 2050
6 A full description of the types of non-energy emissions is available in Canada’s National Greenhouse Gas Inventory Report.39
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOR
Results
This chapter presents results of the EF2023 projections.
These projections are not a prediction, but instead
illustrate possible futures based on the scenarios and
assumptions described in the previous chapter.
Many factors and uncertainties will influence future trends. Key uncertainties
are discussed in each section of this chapter.
The data supporting this discussion, including full data tables for all three
scenarios, is available in the “Access and Explore Energy Futures Data”
chapter.
* All dollar figures throughout the report are in Canadian dollars unless stated otherwise.40
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOR
Greenhouse gas (GHG) emissions
In December 2015, most countries in the world, including Canada,
adopted the Paris Agreement. The overarching goal of the agreement
is to hold “the increase in the global average temperature to well
below 2°C above pre-industrial levels” and pursue efforts “to limit
the temperature increase to 1.5°C above pre-industrial levels.” These
efforts are because the United Nation’s Intergovernmental Panel on
Climate Change indicates that crossing the 1.5°C threshold risks far
more severe climate change impacts, including more frequent and
severe droughts, heatwaves and rainfall. Fundamental to achieving
the goal of the agreement is dramatically reducing global GHG
emissions.
Canada’s long-term climate goal is reaching net-zero GHG emissions
by 2050.7 Given that reaching net-zero emissions by 2050 is the
central focus of both our net-zero scenarios in EF2023, GHG emission
trends are vital to our analysis. Around 80% of Canada’s total
emissions are related to the production and consumption of energy,
so the GHG emission and energy supply and demand projections in
EF2023 are tightly linked.
7 The Canadian Net-Zero Emissions Accountability Act
8 2021 emissions data, along with some historical revisions to 1990-2020 data, was released by Environment and Climate Change Canada in April 2023 in the 2023 National Inventory Report. The modeling in EF2023 is based on
emissions data from the 2022 National Inventory Report, which includes GHG emission data up to 2020. Total emissions shown in EF2023 include Land Use, Land-Use Change and Forestry (LULUCF), which are often negative.
9 Canada reports GHG emissions different formats, including by economic sector. These different categorizations simply allocate GHG emissions into different groupings; there is no difference in the overall magnitude of Canadian
emissions estimates. The economic sectors allocate emissions to the sector from which they originate.Canada’s GHG emission profile
From 2000 to 2019, Canada’s GHG emissions have fluctuated between just
below 700 megatonnes (MT) to around 750 MT. In 2020, emissions fell 8% from
2019 levels. Much of this decrease was a result of lower energy use in response
to actions to reduce the spread of COVID-19, such as travel restrictions and
closing businesses. The decrease in emissions from 2019 to 2020 is the largest
drop in emissions recorded over the period for which data is available (1990
to 2021).
In 2021, emissions were 653 MT, or a 1.2% increase from 2020 levels, but
7.3% lower than in 2019. Figure R.1 shows Canada’s GHG emissions in 2021,8
categorized by economic sector.9
Of the sectors in Figure R.1, GHG emissions fell in electricity (-56%), heavy
industry (-13%), transportation (-4%), and waste and others (-10%) from 2005
to 2021. GHG emissions increased in oil and gas (+13%), buildings (+2%), and
agriculture (+8%) over that same period. Consistent with the past 30 years, about
80% of GHG emissions in 2021 were related to the production and consumption
of energy, mostly from the combustion of fossil fuels. The remaining 20% of
emissions are from other activities such as agriculture, waste management, and
certain industrial processes.
Canada’s GHG emission profile varies significantly among the provinces and
territories, as shown in Figure R.2.
Detailed data and a more thorough description of Canada’s GHG emission profile
can be found in Canada’s National Greenhouse Gas Inventory Report, published
by Environment and Climate Change Canada (ECCC).41
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORFigure R.1:
GHG emissions by economic sector, 2021
Figure R.2:
GHG emissions by province and territory, 2021
42
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORGHG emission projections
This section provides an overview of our projections of GHG emissions in all three
scenarios. The sections that follow explore the energy and GHG emissions trends
for the individual segments of the energy system.
Net economy-wide GHG emissions fall to zero by 2050 in the Global and Canada
Net-zero scenarios, which is a pre-determined outcome due to the nature of the
analysis. Total emission trends are similar in the two scenarios given they share
similar climate policy assumptions. In the Current Measures Scenario, we project
emissions to be 566 MT by 2050, 13% lower than 2021 levels. This projection
of GHG emissions in the Current Measures Scenario only includes policies
currently in place during the analysis and does not reflect recently announced
policies that are in development. Figure R.3 shows total net emissions in all
three scenarios and figure R.4 shows emissions by economic sector in the
Global Net-zero Scenario.
Figure R.3:
Total GHG emissions, all scenarios
43
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORWhich GHG emissions are included in EF2023
Parties to the United Nations Framework Convention on Climate Change (UNFCCC) estimate and report their historical GHG emissions according to guidelines
developed by the UNFCCC. This report is referred to as a country’s National Inventory Report (NIR). The UNFCC’s guidelines for calculating GHG emissions
aim to make reporting by countries transparent, consistent, comparable, complete, and accurate. ECCC is responsible for preparing and submitting Canada’s
national GHG inventory to the UNFCCC.
Each country’s NIR covers emissions (and removals) of GHGs, including carbon dioxide, methane, nitrous oxide, and various other gases that have heat-
trapping potential. GHG emissions are calculated as those that occur within a country. For example, if country A produces and exports natural gas to country
B, any GHG emissions resulting from producing that natural gas (such as the GHG emissions from facilities that process raw natural gas) are attributed to
country A, while emissions related to the combustion of that natural gas are attributed to country B.
The historical GHG emissions that we report in EF2023 align with Canada’s NIR. The latest historical emissions data available is from 2021. The GHG emission
projections in EF2023 are estimates resulting from the Energy Futures Modeling System, relying on inputs based on the scenario premise and assumptions we
describe in the previous chapter. In various publications, such as the Emission Reduction Plan and Biennial Report to the UNFCCC, ECCC produces the official
analysis of Canada’s current emissions outlook and performance against its climate commitments.
Figure R.4:
GHG emissions by economic sector, Global Net-zero Scenario44
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORTable R.1:
Change in emissions from 2021 to 2050 by economic sector, and key outcomes, Global and Canada Net-zero scenarios
Sector 2021 2050 Key outcomes – Net-zero scenarios
Global
Net-zeroCanada
Net-zero
Total 653 MT 0 MT 0 MT • Domestic and global climate policy assumptions drive most of the emission reductions in both net-zero
scenarios, which grow in strength over the projection period.
Buildings 87 MT 25 MT 25 MT • Heat pumps steadily replace natural gas and heating oil furnaces.
• Improved efficiency of buildings, reducing overall space heating needs.
Heavy industry 77 MT 19 MT 19 MT • Innovative industry-specific technologies to reduce energy and process GHG emissions.
• Application of carbon capture, utilization, and storage (CCUS) in industries like chemicals and fertilizers,
cement, and iron and steel.
• Some switching to low- or non-emitting fuels like electricity, hydrogen, and biofuels.
Transport 150 MT 15 MT 14 MT • Electric vehicles become the primary mode of on-road passenger transportation.
• Freight shipping by truck, train, and ship is increasingly fueled by electricity, hydrogen, or biofuels.
• Aviation emissions are reduced using a mix of bioenergy and hydrogen-based aviation fuel.
Electricity 52 MT -36 MT -35 MT • Electricity use doubles over the projection period in both net-zero scenarios.
• Rapid growth in low- and non-emitting generation sources, led by wind, natural gas with CCUS, bioenergy
with CCUS, and nuclear, accompanied by steady growth in solar and hydro.
• The electricity system decarbonizes and becomes net-negative by 2035 with the deployment of bioenergy
with CCUS generation facilities.
Oil and gas 189 MT 17 MT 32 MT • Declines in crude oil and natural gas production in the Global Net-zero Scenario, mostly driven by falling
international demand and prices. Production declines more slowly in the Canada Net-zero Scenario.
• Adoption of CCUS, especially in the oil sands.
• Rapid uptake of processes and technologies to significantly reduce methane emissions from conventional
oil and natural gas production and processing activities.In both net-zero scenarios, all sectors have much lower emissions by 2050, compared to 2021 levels. Table R.1 shows the GHG emissions in each sector in 2050,
and briefly describes the transformations that occur in each sector. 45
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORSector 2021 2050 Key outcomes – Net-zero scenarios
Global
Net-zeroCanada
Net-zero
Low-emitting
hydrogen
production0 MT -21 MT -25 MT • To meet growing hydrogen demand from domestic and international markets, hydrogen production grows
significantly.
• Low or non-emitting hydrogen is produced from electricity, natural gas, and biomass.
• Coupled with CCUS, production of hydrogen using biomass results in net-negative emissions from the
sector.
Direct air capture
(DAC)0 MT -46 MT -55 MT • DAC technology is deployed later in the projection period, offsetting particularly difficult-to-reduce GHG
emissions from other sectors.
Agriculture 69 MT 50 MT 49 MT • We assume GHG emissions from agriculture decline somewhat with the adoption of innovative agricultural
practices.
Waste and others
(coal production,
light manufacturing,
construction, and
forest resources)47 MT 26 MT 26 MT • We assume emissions from waste decline, in part due to proposed regulations that aim to reduce landfill
methane emissions.
Land Use, Land-
Use Change and
Forestry (LULUCF)-17 MT -50 MT -50 MT • We assume LULUCF emissions are net-negative in 2050, based on a review of various studies and
projections by other organizations.
46
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOREnergy demand
This section first discusses secondary10 (or “end-use”) energy demand11
projections by reviewing energy use by sector of the economy and their
associated GHG emissions. We then describe the primary energy demand12
projections. End-use demand includes consumption of energy, including electricity
and hydrogen, but not the energy used to produce electricity and hydrogen.
We make projections about energy demand by simulating the energy choices of
households and businesses, including the energy technologies and fuels they use.
Economic activity, population growth, technology characteristics, energy prices,
and climate policies all influence the model’s outcomes.
Our energy demand projections also rely on projections about the need for
energy services. Energy services are not the energy or technologies we use, but
rather the things that energy enables us to do, like heat our homes, travel from
place to place, or run equipment at a business. This includes projections of the
output from various industries, the number of homes and businesses requiring
heating and cooling, and the number of kilometres that passengers and goods
move. The eventual level of energy services required may be different than in our
scenarios, which would impact our projections of energy use.
In all three scenarios, energy use increases in the near term
We estimate Canadian end-use energy demand increased 4% in 2022, largely a
result of increasing industrial and oil and gas activity, as well as a return to near
pre-pandemic transportation levels. We project that demand growth continues in
2023 and 2024, but at a slower pace.
10 Energy used by final consumers for residential, agricultural, commercial, industrial and transportation purposes. It excludes the energy used to generate electricity, which is included under primary demand.
11 That energy is accounted for in primary energy demand. Historical energy demand data is sourced primarily from Statistics Canada’s Report on Energy Supply and Demand in Canada. This data is supplemented with additional details
from ECCC, Natural Resources Canada, and various provincial data sources.
12 Primary demand is the total energy used in Canada, including energy to produce electricity and hydrogen.In the long term, energy use falls in both net-zero scenarios
While we project continuing economic and population growth, end-use demand
declines by 22% from 2021 to 2050 in the Global Net-zero Scenario and 12%
in the Canada Net-zero Scenario. As we describe in the following sections, this
decline is largely due to switching to different technologies and fuels, more efficient
use of energy, and lower activity levels in some sectors. In particular, switching
from fossil fuels to electricity can reduce overall energy demand significantly
because electric devices often use energy more efficiently. For example, 30%
or less of the energy in gasoline is used to propel vehicles with much of the
remainder being lost to heat. In an electric vehicle (EV), much more of the energy
stored in the vehicle’s battery is converted to movement. The combined impact
of these changes reduces Canada’s energy intensity. The energy intensity of the
economy, often measured as energy use per $ of real gross domestic product,
declines by 2.2% per year in the Global Net-zero Scenario, and 1.7% per year in
the Canada Net-zero Scenario. Energy intensity has typically fallen about 1% per
year on average in recent decades.
In the Current Measures Scenario, energy use is relatively stable
In the Current Measures Scenario, energy use is relatively stable until 2040.
After 2040, energy use begins slowly increasing again. This increase is because
climate policies do not strengthen beyond 2030, but the economy and population
continue to grow, increasing energy use. Figure R.5 shows the changes in end-
use energy demand in each scenario. 47
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORIn all scenarios, households and businesses continue to receive the energy
services much like they do today, like being able to reliably heat their homes
or travel from place to place. As described in the following sections, we
project considerable changes to the types of fuels and technologies that
power the energy system in the future, but little change to the energy services
Canadians receive.Figure R.5:
Change in end-use energy demand by sector, 2021 to 2050, all scenarios
KEY TRENDS
Energy demand
• Rapid adoption of devices that use electricity,
like EVs and heat pumps in the net-zero
scenarios.
• In both net-zero scenarios, clean fuels such
as hydrogen and bioenergy, along with CCUS,
play an increasing role in areas that are harder
to electrify.
• Energy efficiency improves steadily over the
projection period.48
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORResidential and commercial
The residential sector made up 13% of Canada’s end-use energy demand,
and 6% of its GHG emissions in 2021. The commercial sector, which includes
buildings like offices, restaurants, and schools, made up 11% of Canada’s
end-use energy demand, and 7% of its GHG emissions in 2021. Most energy
use in both sectors is electricity and natural gas, and in some regions refined
petroleum products (RPPs) and biomass are also key fuels. When combined,
GHG emissions in both sectors are referred to as the “buildings sector” for the
purposes of GHG emission reporting. GHGs in the buildings sector are primarily
the result of burning natural gas and fuel oil for heating buildings and water.
In the Global and Canada Net-zero scenarios, we project that energy use
patterns change considerably in both sectors. The electrification of space and
water heating, along with rapid improvements in the efficiency of buildings, are
core to this sector’s transformation.
In the Global Net-zero Scenario, we project that building shell efficiency (or how
well buildings resist losing heated or cooled air to the outside environment) of
the entire residential building stock improves by 50% from 2021 to 2050. In the
commercial sector, this improvement is slightly slower at 43%. Efficiency gains
are driven by energy retrofits of existing buildings and increasingly strict building
codes for new buildings, with all new homes built to a “net-zero-ready” standard
by 2030. Efficiency improvements are similar in the Canada Net-zero Scenario.
These efficiency improvements are important because residential and commercial
floorspace both grow around 50% over the projection period as new houses
and buildings are built. In the Current Measures Scenario, less ambitious policy
measures result in slower improvements in efficiency.
49
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORFuel-switching is necessary to achieve net-zero
In both net-zero scenarios, efficiency improvements support achieving net-
zero, but switching existing fossil fuel heating devices to non-emitting options
is necessary to achieve net-zero emissions. In many regions, heating needs are
currently met with natural gas or heating oil furnaces. Due to our assumptions
about climate policies and technology cost reductions, electric heat pumps
steadily become the device of choice when households and businesses replace
their furnaces. Heat pumps also grow in regions that currently rely heavily on
electric baseboard heating. Because heat pumps are very energy efficient,
switching from baseboard heating to heat pumps helps limit electric demand
growth in the building sector. Currently, heat pumps are gaining popularity
in some regions in Canada but are used sparingly in many regions. More
information about the characteristics of heat pumps is in the text box “Spotlight
on Heat Pumps.” Importantly, our projections are based on parameters about the
willingness of households and businesses to adopt new technologies like heat
pumps. However, societal preferences change over time, which could change
the adoption rates of heat pumps, or any of the other technologies we discuss in
this chapter.
Heat pump use increases in both net-zero scenarios, but some gas and oil
furnaces remain
In both net-zero scenarios, heat pumps provide about 50% of residential
space heating needs by 2050, up from 6% in 2021, as shown in Figure R.6.
This is similar in the commercial sector as heat pumps provide around half
of space heating needs by 2050. While heat pumps dominate new heating
technology installations by the mid-2030s, the rate of change in the residential
and commercial sectors tends to be slow as most households and businesses
usually replace devices near the end of their useful lives. As a result, we project
that some natural gas and heating oil furnaces remain in 2050 in both net-zero
scenarios. Efficiency improvements and blending fossil fuels with low-carbon fuels
such as hydrogen and renewable natural gas helps reduce the emissions from
these buildings. By 2050, approximately 13% of the energy used in gas-fired
residential and commercial space and water heating is renewable natural gas,
and 7% hydrogen.
50
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORSpotlight on heat pumps
Electric heat pumps are a key technology for building decarbonization in our net-zero scenarios.
Heat pumps have been used globally for decades and most Canadians already have technologies
that operate under the same principles in their homes: refrigerators and air conditioners. Heat
pumps work by moving heat from one space (a source) to another (a sink). The two most common
sources for heat pumps are the outside air and the ground. Electricity is used to transfer heat from
the air or ground to a sink, either the indoor air or water of a building. This process can be reversed
so that the building acts as a source and the air or ground acts as a sink, cooling the building
instead of heating it. Therefore, heat pumps can be used year-round in Canada to regulate indoor
temperatures.
Since heat pumps move heat instead of generating it, they can achieve efficiencies far beyond
those of conventional heating methods like a natural gas furnace. Heat pumps currently on the
market can achieve efficiencies of 300-550% depending on the temperature of the source and the
size of the heat pump.
Air-source heat pumps are lower cost and cheaper to install than ground-source heat pumps and
subsequently makeup most of the installed heat pumps across Canada, both now and in our
scenarios. However, as the outside air temperature decreases, air source heat pumps become
less efficient. Currently, cold climate air-source heat pumps can still achieve efficiencies of 180%
at -15°C and still function well up to -25°C. Below this temperature, however, they have difficulty
supplying enough heat to a home. As temperatures decrease, homes lose heat more quickly and
more energy is required to extract heat from the air.
Canadians that live in climates that drop below -25°C and wish to install heat pumps have two
options to heat their homes even on the coldest of days. First, when installing a heat pump, they
can leave their current heating system as a backup or install a new backup at the same time. This
backup can be any conventional technology used to heat a home, such as a natural gas furnace
or electric resistance heating. Secondly, Canadians can choose to invest in a ground-source heat
pump instead. Even in the coldest climates in Canada, the ground retains significantly more heat
than the air and therefore can efficiently provide heat all winter.
Further information on heat pumps including functionality, technical specifications, and installation
is available from Natural Resources Canada’s Heating and Cooling With a Heat Pump.
51
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORFigure R.6:
Residential space heating by technology, Global Net-zero Scenario
Total energy use in the residential sector declines by 22% from 2021 to 2050
in the Global Net-zero and Canada Net-zero scenarios. While overall demand
decreases, electricity use grows at 1.2% per year over the projection period,
largely because of steady growth of electric heating with heat pumps. As more
homes switch to heat pumps and electric hot water heating, demand for natural
gas falls steadily. In the Global Net-zero Scenario, residential natural gas demand
is 72% lower in 2050 compared to 2021, and 73% lower in the Canada Net-zero
Scenario. Energy use from at-home charging of EVs is accounted for in the
transportation sector, which we describe later in this chapter.
In the Current Measures Scenario, the residential and commercial sectors show
steady improvements in efficiency plus some switching to electricity-based
heating. However, the pace of change is much slower than in the net-zero
scenarios. Natural gas demand in these sectors declines by 18% from 2021
to 2050, while electricity use also increases at a pace similar to the past two
decades. Figure R.7 shows total electricity and natural gas demand in the Global
Net-zero and Current Measures scenarios.
Residential and commercial GHG emissions
GHG emissions from residential and commercial buildings follow the energy
demand trends we describe above. GHG emissions from the buildings sector
track closely to the volume of natural gas and heating oil used. In the Global
Net-zero Scenario, GHG emissions in the buildings sector fall from 87 MT in 2021
to 25 MT in 2050, a 71% decrease, with very similar reductions in the Canada
Net-zero Scenario. In both net-zero scenarios, emissions from the buildings
sector remain positive in 2050, but Canada overall achieves net-zero due to
negative emissions occurring in other sectors. In the Current Measures Scenario,
emissions decline more slowly in the buildings sector, reaching 64 MT in 2050,
a 27% decline. Figure R.7:
Combined residential and commercial buildings energy use by fuel, Global
Net-zero and Current Measures scenarios
52
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORIndustrial
The industrial sector accounted for 54% of Canada’s end-use energy demand
in 2021, making it the largest in terms of energy use. The industrial sector is
diverse, with several sub-sectors, including oil and natural gas, and various heavy
industries like cement, pulp and paper, and iron and steel. The sector is also
diverse in terms of energy use, with natural gas making up the largest share of
fuel use at 49% in 2021, followed by RPPs (28%), electricity (14%), and biofuels
(8%). The main use of energy in the industrial sector is to produce heat, which
is used in different industrial processes. Energy commodities such as RPPs and
natural gas liquids are also used as non-energy feedstock in sectors such as
chemicals and fertilizer production.
Industrial GHG emissions are mainly from oil and gas and heavy industry
In 2021, the oil and natural gas sector emitted 189 MT, 29% of Canada’s total
emissions. Heavy industry made up 12% of total emissions in 2021, or 77 MT.
This section focuses mostly on the energy use and GHG emission trends in heavy
industry. We describe the trends for the oil and natural gas sector in the “Oil and
natural gas production” section.
In both net-zero scenarios, new technology, CCUS, and fuel switching are
key changes in heavy industry
In the Global and Canada Net-zero scenarios, the changes that occur in the
sector to reduce GHG emissions is varied due to unique processes specific
to each industrial subsector. However, the primary factors driving change are
technological innovation, the application of CCUS technology, and fuel switching.
In heavy industry, there are two major emissions sources: emissions from the
combustion of fossil fuels to create high temperature heat and process emissions
that occur from chemical or physical reactions in the production process itself.
53
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORLower costs and stronger climate policies drive new technology
deployment
New industrial technologies are adopted in the net-zero scenarios as they
become more widely available at lower costs, and as producers look for options
to respond to strengthening climate policies. For example, in the aluminum
production sector, the use of inert anodes becomes an increasingly economic
choice. Compared to carbon anodes, the benefit of inert anodes is that carbon
dioxide (CO2) is no longer released as a byproduct of the aluminum smelting
process.
Another example of technology innovation occurs in the iron and steel industry.
Most new steel produced in Canada occurs by reacting iron ore with coal, which
creates both combustion and process emissions. In both net-zero scenarios, iron
and steel producers use a mix of technologies that rely on electricity, natural gas
with CCUS, and hydrogen to decarbonize the industry. Steel can also be recycled
using 100% electricity and producers increasingly use this pathway where scrap
steel is available.
CCUS becomes an important decarbonization option in the industrial sector
CCUS becomes an important decarbonization option where a production
process requires high-temperature heat and/or has significant process related
emissions. CCUS is a suite of technologies that capture CO2 from facilities to
either store it in geological formations underground or use in other processes,
like permanent mineralization in concrete. Instead of being permanently stored,
there are also other potential uses for captured carbon, such as producing
synthetic fuels.
In heavy industry, several sectors increasingly use CCUS over the projection
period in both net-zero scenarios, as shown in Figure R.8. We project the heavy
industry sector captures a total of 6 MT of GHG emissions in 2030, increasing to
24 MT by 2040 in the Global Net-zero Scenario, after which CCUS in the sector
is relatively stable. This excludes the carbon captured in the electricity and oil
and gas sectors, which we describe later in this chapter. In the Canada Net-zero
Scenario, CCUS plays a similar role in heavy industry.Figure R.8:
GHG emissions captured using CCUS in heavy industry,
Global Net-zero Scenario
54
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORFuel-switching is an important trend in both net-zero scenarios
Various climate policies change the relative cost of fuels and industries respond
by switching to low- or non-emitting energy sources when feasible. As shown in
Figure R.9, the share of low- or no-carbon energy sources grows steadily over
the projection period. The use of low-carbon hydrogen as a share of total heavy
industrial energy demand increases from less than 1% in 2021 to 6% in 2050 in
the Global Net-zero Scenario, and similar in the Canada Net-zero Scenario. Other
energy sources, such as electricity, biomass, biofuels, and renewable natural gas,
increase their share in both net-zero scenarios. These low- or no-carbon energy
sources offset energy from fossil fuels, whose combined share of the heavy
industrial sector’s energy use falls from around 60% of energy use in 2021 to
32% in 2050.
Figure R.9:
Share of energy type in the industrial sector, excluding the oil and natural
gas sector, Global Net-zero Scenario
55
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOREnergy use changes are much slower in the Current Measures Scenario
In the Current Measures Scenario, energy use in the industrial sector undergoes
some change, such as efficiency improvements and some limited applications
of CCUS. However, the pace of change is much slower than in both net-zero
scenarios. This is because of our assumptions about climate policies and
technology costs in this scenario give less incentive for industries to change their
energy use patterns.
Total industrial energy use increases less than 10% in both net-zero
scenarios
We project total energy use in the heavy industry sector to be relatively flat in
both net-zero scenarios, increasing less than 10% from 2021 to 2050, compared
to nearly 20% in the Current Measures Scenario. New technologies and energy
efficiency improvements reduce energy use in the sector.
In the Global Net-zero Scenario, total energy use in the entire industrial sector,
including energy use in oil and gas, light industry, and for direct air capture
processes, declines by 27% to 2050. Declining energy use for oil and natural gas
production drives this trend and is partly offset by the emergence of direct air
capture (DAC) facilities later in the projection period, which use large amounts of
electricity and natural gas. In the Canada Net-zero Scenario, oil and natural gas
production are higher and total industrial energy use is higher than the Global
Net-zero Scenario, but still declines by 10% by 2050. In the Current Measures
Scenario, total industrial energy use grows steadily, although somewhat slower
than over the past two decades.
Figure R.10 shows total industrial demand by fuel in the Global Net-zero
Scenario. By 2050, the share of electricity, clean fuels such as bioenergy and
hydrogen, and fossil fuels with CCUS more than triples from current levels. Figure R.10:
Total industrial energy use by fuel, Global Net-zero Scenario
Industrial GHG emissions
The key trends we describe in the previous section, technological innovation,
CCUS, and fuel switching, result in steadily decreasing GHG emissions from the
heavy industry sector in both net-zero scenarios. In both net-zero scenarios,
emissions decline by nearly 75% from 2021 levels. This implies that heavy
industry GHG emissions are positive in 2050, although Canada still achieves net-
zero due to negative emissions occurring in other sectors. Emissions fall by 15%
in the Current Measures Scenario.
DAC facilities, which we consider to be a part of the broader industrial sector,
result in net-negative emissions by 2050 in both net-zero scenarios. Emissions
from the oil and gas sector drop significantly in both net-zero scenarios. We
describe our energy use and GHG emission results for both of these sectors later
in this chapter. 56
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORTransportation
The transportation sector accounted for 21% of Canada’s end-use energy
demand in 2021. This demand includes energy used to transport people and
goods using a variety of modes, including on-road vehicles, rail, airplanes,
and boats. Almost all energy use in this sector is RPPs derived from crude oil.
Gasoline, the primary fuel for on-road passenger vehicles, made up 53% of total
transportation demand in 2021. In the freight sector, diesel is the most common
fuel, making up 32% of total transportation demand in 2021. Aviation fuel,
biofuels, and heavy fuel oil made up much of the remaining energy use in 2021.
Electricity is a small but growing portion of energy demand in the transportation
sector.
The transportation sector’s GHG emissions in 2021 were 150 MT, or nearly a
quarter of Canada’s total emissions. Emissions from the sector have declined by
4% since 2005. Transporting passengers accounted for 57% of GHG emissions
in the transportation sector, with freight making up 33% and the remaining
emissions coming from off-road vehicles.
Passenger transportation
In both our net-zero scenarios, the primary change in the passenger
transportation sector is the movement towards electric passenger vehicles and
away from internal combustion engine (ICE) vehicles. Emissions from ICE vehicles
remaining on the road also decline.The use of EVs increases substantially in all scenarios
EV sales, including plug-in hybrid-electric vehicles (PHEVs), made up over 8%
of all vehicles sales in Canada in 2022, up from 2% in 2018. We project this
trend to accelerate in the Global and Canada Net-zero scenarios, with nearly all
passenger vehicle sales being EVs by 2035. However, the total stock of vehicles
on the road changes more slowly, as vehicles can stay on the road for 15 or more
years. Though sales of new ICE vehicles are nearly zero by 2035, there are some
older vehicles on the road by 2050 in both net-zero scenarios. In the Current
Measures Scenario, EV sales grow at a slower rate than in the net-zero scenarios
but still become a competitive choice for consumers, making up 50% of all
vehicle sales by 2035, and 75% in 2050. Figure R.11 shows the share of EV sales
and passenger vehicles on the road that are EVs in the Global Net-zero Scenario.
The electrification of the passenger vehicle fleet is driven by the policies we
assume in the net-zero scenarios. The federal mandatory zero-emission vehicle
sales targets and similar policies in British Columbia (BC) and Quebec, federal
and provincial EV incentives, and increasing carbon pricing all increase the
availability and cost-effectiveness of EVs compared to ICE vehicles. In addition,
we assume the costs of batteries, which are major component of the cost of EVs,
decline over the projection period.
Emissions from the remaining ICE vehicles decrease significantly
While EVs gain an increasing market share over the projection period, emissions
from ICE vehicles also decline in all three scenarios. Policies, including Canada’s
light-duty vehicle GHG emissions standards and Clean Fuel Regulations, result
in lower overall emissions per kilometre travelled by ICE vehicles. This includes
greater blending of biofuels into the liquid fuel supply and better fuel efficiency of
new ICE vehicles. Combined with wide-scale adoption of EVs, the emissions per
kilometre travelled by passenger vehicles fall by around 95% in both the Global
and Canada Net-zero scenarios from 2021 to 2050. In addition to the switch to
EVs, public transportation continues to play a key role in moving people. Transit is
increasingly powered by electricity and bioenergy in the net-zero scenarios.57
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORAir travel emissions reduce due to aircraft efficiency improvements and use
of clean fuels
In all three scenarios, demand for aviation fuel recovers to pre-pandemic levels
by 2023. In the Global Net-zero Scenario, we project energy use for passenger
aviation remains relatively stable after 2023 as newer, more efficient aircraft help
to improve fuel efficiency of air travel, and the trends are similar in the Canada
Net-zero Scenario. In the net-zero scenarios the main source of GHG emissions
reductions in the sector are through increased use of biofuels and hydrogen-
based fuels.
Passenger transportation energy use declines across all scenarios
Led by large-scale adoption of EVs, we project total energy use in the passenger
transportation sector to decline by 43% from 2021 to 2050 in the Global Net-
zero Scenario and similar levels in the Canada Net-zero Scenario. This drop in
energy use is largely due to EVs being far more energy-efficient compared to
ICE vehicles13. By 2050, electricity makes up nearly 50% of the energy use in the
passenger transportation sector in both net-zero scenarios, up from below 1% in
2021. Low-carbon aviation fuel, conventional jet fuel, gasoline, and ethanol make
up much of the remaining fuel mix in 2050. In the Current Measures Scenario,
passenger transportation energy use declines slowly after rebounding to pre-
pandemic levels in 2023. Increasing number of EVs and improving efficiency of
ICE vehicles are reasons for this decline.
13 CER Market Snapshot: Battery electric vehicles are far more fuel efficient than vehicles with internal combustion enginesFigure R.11:
EVs as a share of total vehicle sales and vehicles on the road,
Global Net-zero Scenario
58
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORFreight transportation
In both net-zero scenarios, we project a few key shifts in the energy use and
technologies used to transport goods. Electric trucks and vans increase
significantly in some segments of the freight sector but in the heavy freight sector
we project that other options are viable, including increasing use of hydrogen
fuel cell technology. Biofuels also become an economically attractive fuel in the
net-zero scenarios, providing a low-carbon fuel that can be used in existing diesel
engines, or blended with fossil fuel-derived diesel to reduce the emission intensity
of that fuel.
Light-duty freight vehicles are typically used to move smaller loads over relatively
short distances. In both net-zero scenarios, electric trucks and vans gradually
become the most economic choice of vehicle to serve this purpose. Nearly all
light-duty freight vehicle sales are electric by 2040 in both net-zero scenarios.Hydrogen-based vehicle use grows significantly in the heavy freight sector
in the net-zero scenarios.
For heavier freight, electric-powered vehicles take a share of the market in
our net-zero scenarios, as do other technologies. A robust hydrogen supply
develops in both net-zero scenarios, in part due the demand for hydrogen
to use in trucks, rail locomotives, and marine vessels equipped with fuel cell
technology. Fuel cells convert hydrogen to electricity, which then drives electric
motors. Compared to batteries, compressed hydrogen paired with fuel cells is
more energy-dense, which is beneficial when moving heavy goods over long
distances. The use of hydrogen in the freight sector grows from nearly 0.5 MT in
2030 to almost 5 MT in 2050 in the Global Net-zero Scenario, with slightly more
in the Canada Net-zero Scenario. Electricity demand for freight transportation
reaches over 90 terawatt-hours (TWh) by 2050 in the Global Net-zero Scenario.
Given the relatively high efficiency of EVs, this represents a large portion of freight
activity. Unlike the passenger sector, where electrification of personal vehicles
has significant momentum, the relative mix of technologies in the freight sector is
more uncertain. Depending how technologies and markets evolve, we may see
more or less hydrogen, electricity, or other clean fuels in the future. We explore
this uncertainty further in the “What if” case for hydrogen supply and demand,
located in the hydrogen results section.
59
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORRenewable diesel use grows to 35% of the diesel fuel supply by 2050 in the
Global Net-zero Scenario
We also project steady growth of biofuel use in the freight sector. The most
common biofuels used today are ethanol and biodiesel. These biofuels are often
blended into petroleum-based fuels for use in ICE vehicles. However, the rate at
which these fuels can be blended into the petroleum-based fuel stream is limited,
usually anywhere from 5 to 20% depending on the characteristics of the engine.
In the Global and Canada Net-zero scenarios, renewable diesel, often referred
to as hydrogenation-derived renewable diesel, emerges as the leading biofuel
over the projection period. Renewable diesel is chemically equivalent to diesel
derived from fossil fuels. This means it is a “drop-in” biofuel and can be used as a
direct replacement for petroleum-based diesel or blended at a much higher ratio
than biodiesel. Renewable diesel can be derived from many different processes,
allowing a diverse set of biomass feedstocks to be used. By 2030, in the Global
Net-zero Scenario, we project renewable diesel’s share of the diesel fuel supply to
reach 7%, then grow to 35% by 2050.
In the Current Measures Scenario, the freight sector gradually becomes
more efficient, with improvements mostly focused on engine efficiency and
aerodynamics. We also project much lower uptake of electric and hydrogen fuel
cell vehicles, and less use of biofuels.
Freight energy use decreases in the net-zero scenarios, and increases in
the Current Measures Scenario
Total energy use in the freight transportation sector increases in the near
term as shipping volumes recover to pre-pandemic levels. In the longer term,
demand trends downward in both net-zero scenarios. This decrease is primarily
due to growth of electric and hydrogen fuel cell freight vehicles, both of which
are more energy efficient compared to ICE vehicles. This effect is partially offset
by steadily growing demand for freight transportation services. In the Current
Measures Scenario, energy use in the freight sector increases by 25% over the
projection period.
Figure R.12 shows end-use demand by fuel in the transportation sector, including
passenger, freight and off-road energy use in the Global Net-zero Scenario, and
total end-use demand in the other two scenarios.
60
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORTransportation GHG emissions
Emissions from the transportation sector decline steeply in both net-zero
scenarios while staying relatively flat in the Current Measures Scenario. We
project that GHG emissions in the Global Net-zero Scenario fall by 90% from
2021 to 2050, and to a similar level in the Canada Net-zero Scenario. In both net-
zero scenarios, these reductions are driven by our assumptions about policies like
the federal mandatory zero-emission vehicle sales targets and steadily increasing
economy-wide carbon pricing. Declining costs of certain technologies such as
batteries in EVs and hydrogen vehicles also factor into our projections. While
Canada achieves net-zero by 2050 in our net-zero scenarios, some emissions
from the transportation sector remain in 2050, mainly in the aviation and freight
sectors. In the Current Measures Scenario, emissions fall steadily after 2025,
with continued emission reductions in the passenger sector offsetting growing
emissions in the freight sector. Figure R.12:
Transportation sector end-use demand by fuel, Global Net-zero Scenario
61
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORPrimary energy demand
In this analysis, primary demand is the total amount of energy used in Canada.
Primary demand is calculated by adding the energy used to generate electricity14
and hydrogen to total end-use demand, and then subtracting the end-use
demand for electricity and hydrogen. Primary demand is higher than end-use
demand due to factors such as heat loss in thermal electric generation, and the
energy required for the hydrogen production process.
In both net-zero scenarios, total primary demand falls, largely a result of
declining fossil fuel use
Coal use continues its current declining trend, largely due to the phase out of
coal-fired power generation. Demand for RPPs falls, largely due to much greater
use of electricity in the transportation sector. One source of crude oil demand that
is relatively stable over the projection period is for non-energy products such as
asphalt, lubricants, and petrochemical feedstocks.
Natural gas demand declines in both net-zero scenarios, and increases in
the Current Measures scenario
Natural gas demand falls due to electrification of home heating, less natural gas
use in the upstream oil and natural gas sectors, and efficiency improvements in
the residential and industrial sectors. The decrease in natural gas demand is less
than for coal and RPPs, as we project that natural gas becomes increasingly
used in the power generation sector when coupled with CCUS, and as a
feedstock for hydrogen production. In the Current Measures Scenario, primary
energy demand is relatively flat until 2040, before increasing in the last decade
of the projection period. Figure R.13 shows primary demand by fuel for all three
scenarios.
14 Including fossil fuels, nuclear, and renewable energy. See Figure R.25 for a breakdown of these demands.
62
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORFigure R.13:
Primary energy demand by fuel, all scenarios
KEY UNCERTAINTIES
Energy demand
• Energy use drivers: The need for energy in each sector is driven by our projections of activity in that sector, like economic output of various industries or
population growth. Different outcomes for any of the energy use drivers could impact the long-term energy outlook.
• Technology: We make assumptions about the costs of various energy technologies in the future. Costs that are different than we assume will change the
decision-making of energy users and the energy use projections in our scenarios. We explore some of these uncertainties in the “What if” cases throughout
this report.
• Behavioural change: Energy users’ decision-making changes as societal preferences change over time. For example, preferences could evolve towards
more or less dense cities, more remote work, or bigger or smaller homes, all of which can influence energy use projections.
63
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORElectricity
Canada’s electricity system is currently among the lowest emitting in the world,
with 81% of the sector’s generation coming from low- or non-emitting sources.
This is largely due to Canada’s hydroelectric generation resources, which
supplied over 61% of Canada’s electricity in 2021. Nuclear generation and,
increasingly, wind and solar, also contribute to Canada’s high proportion of non-
emitting power generation.
To develop the electricity production projections in EF2023, we rely on a model
that simulates the operations and the investment decisions of the electricity
sector, while also ensuring reliability of the system. The model builds new
generation, storage and transmission infrastructure based on minimizing the
total system costs throughout the projection period. We also incorporate our
assumptions about policies and the costs and operational characteristics
of various generation technologies. Factors beyond these can impact the
development of a wide array of energy projects, including electricity projects.
Examples include concerns about air quality, safety, noise, competing land-uses,
or visual impacts. Societal preferences and how they may evolve in the future,
are largely beyond the scope of our analysis but have potential to impact the
projections for any of the electricity generation technologies we describe in this
section.
64
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORKEY TRENDS
Electricity
• Electricity use more than doubles over the projection period in
both net-zero scenarios.
• We project the most growth in wind generation in all scenarios,
including the Current Measures Scenario, despite less ambitious
climate policies and more modest technology cost improvements.
• The electricity system decarbonizes and becomes net-negative by
2035 with the deployment of BECCS generation facilities.
Electricity use
As described in the “Energy demand” section of this chapter, we project that
electricity demand grows significantly in all end-use sectors in both net-zero
scenarios. This growth is driven by wide-scale adoption of EVs and heat pumps,
and electrification of some industrial activities. In addition, as we describe in more
detail in the “Hydrogen” section of this chapter, hydrogen production becomes
a significant source of new electricity demand in the future. Finally, we project
construction of direct air capture (DAC) facilities, which become another new
source of electricity demand later in the projection period. We describe the role of
DAC in the “Negative emissions” section later in this chapter.
Figure R.14 shows electricity demand by sector in the Global Net-zero Scenario.
Overall, we project electricity demand to grow 120% from 2021 to 2050 in
the Global Net-zero Scenario, and 135% in the Canada Net-zero Scenario.
In both scenarios, the annual rate of demand growth is almost triple that of the
1995 to 2019 period. In the Current Measures Scenario, electricity demand
grows more slowly than in the net-zero scenarios, increasing by 62% over the
projection period.Canada’s electricity system is regionally diverse
The generation mix in each province and territory is largely determined by the
resources it has available. Quebec, Manitoba, Newfoundland and Labrador,
Yukon, and BC have significant amounts of hydro generation, whereas Alberta,
Saskatchewan, and remote and northern communities rely more on fossil fuel
generation. Ontario and New Brunswick both have diverse electricity mixes,
including nuclear. This regional diversity means that the emission reduction
pathways in our net-zero scenarios are unique to each region’s specific
circumstances.
The electricity sector has exhibited the greatest reduction in emissions among
Canada’s major sectors, cutting emissions by more than half from 2005 to
2021. Many provinces reduced emissions from this sector during that time, with
the biggest reductions from Ontario and Alberta. Ontario phased out coal-fired
generation by 2015 and Alberta is likely to do so by the end of 2023. In total, the
electricity sector accounted for 8% of Canada’s emissions in 2021.
Electricity use increases while emissions decrease in the net-zero scenarios
In the Global and Canada Net-zero scenarios, electricity becomes the
cornerstone of Canada’s energy system. In both scenarios we project the
amount of electricity generated and consumed in Canada in 2050 more than
doubles from current levels. While the need for electricity grows, we project the
electricity system also reduces emissions to net-zero by 2035 in both scenarios.
This reduction in emissions is led by growth in wind, nuclear, hydroelectric, and
natural gas-fired generation with CCUS, and the phase out of coal-fired electricity
generation. After 2035, GHG emissions from the electricity sector become net-
negative, meaning the sector removes more emissions than it emits through
deployment of bioenergy coupled with CCUS technology (BECCS). 65
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOROur electricity projections are also influenced by changes in day-to-day and
seasonal electricity use patterns. As new uses of electricity emerge, the annual
peak in electricity demand in a system will likely change. This change will
influence how electricity systems evolve as utilities and system operators need to
reliably meet the annual peak in electricity demand, which might occur for only an
hour or two in a year.
In both net-zero scenarios, the annual hourly peak of electricity demand
grows in all regions
This increase is because of growing electricity use overall, but also growing use of
devices that increase electricity use more during a certain period during the day
or in a particular season. For example, EVs typically draw relatively large amounts
of electricity over a short period when owners plug them in. Similarly, greater use
of heat pumps means that overall electricity demand is more sensitive to weather
than it is now. Figure R.14:
Electricity use by sector, Global Net-zero Scenario
What if electricity vehicle charging patterns result in higher peak
electricity demand?
Sales of EVs in Canada have quickly increased in recent years, reaching
over 8% of total vehicle sales in 2022. While ICE vehicles rely on RPPs
like gasoline and diesel as their source of energy, EVs are powered by
electricity stored in large batteries, which drive electric motors, propelling
the vehicle. EV batteries are charged using the same electricity grid we
use to power other aspects of our daily lives.
EVs need more electricity than most other household devices
Most currently available EVs consume about 3,000 to 6,000 kilowatt-
hours (kWh) in a year based on 20,000 km of driving. A new refrigerator
uses about 500 kWh per year. Currently, most EV charging occurs
through a charger installed in a garage or at a dedicated public charging
station. Most EV charging occurs at a fairly high rate of power transfer
in order to charge batteries quickly. Most home chargers can charge a
depleted battery in 4 to 12 hours. Many public EV charging stations are
much quicker than home chargers.
EV owners tend to plug their vehicles into chargers when they arrive
home. For many drivers, this is often in the late afternoon when they
return from work. Residential electricity demand is often already high
during these hours, including higher use of stoves and electronics. It is
also often the hottest part of the day in the summer, meaning more air
conditioning units may be running. If charging patterns are not managed
as the share of EVs grows, EV charging could contribute to much higher
electricity use during peak times. The level of peak electricity demand
throughout the day and over the year affects how electricity systems
develop. Utilities and system operators need to continually meet the
electricity needs of users, but also have sufficient capacity to meet
annual peak electricity demand, which might be for only a few hours in
a year.66
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORHow EV charging patterns affect peak electricity demand largely depends on
how much utilities and grid operators can more evenly spread charging out
across the hours of the day. Charging patterns can be influenced through
market mechanisms, such as offering consumers lower electricity prices
during certain hours of the day when demand is lower. Most home chargers
can be controlled by consumers or grid operators to delay charging to lower
demand hours.
“What if” EV charging during peak hours is not managed?
In the Global Net-zero Scenario, we assume that a combination of price
signals, technologies, and behavioural changes result in charging that is
more evenly spread across the hours of the day. In this “What if” analysis, we
explore how uncoordinated EV charging might impact the electricity system
and ultimately the total amount of electricity generating capacity required.
This analysis, the Uncoordinated Charging Case, models an outcome where
more drivers charge their EVs during peak hours.
Peak electricity demand in each province and territory increases throughout
the projection period in the Global Net-zero Scenario as total electricity
demand increases and electricity use patterns change. For example, peak
electricity demand in Ontario was 22.2 gigawatts (GW) in 2021. In the Global
Net-zero Scenario, peak demand is 177% higher by 2050, reaching 61 GW.
This increase in peak demand is similar in magnitude in many other provinces
and territories.
However, while total electricity use is identical in both cases, peak demands
by 2050 in most provinces and territories in the Uncoordinated Charging
Case are between 1 and 5% higher than in the Global Net-zero Scenario.
Despite this higher peak in demand, the overall impact on system-wide
needs for new capacity is relatively small, as we project some changes to
the generation mix compared to the Global Net-zero Scenario, as well as
changes to the operations of the electricity system.Energy systems become more flexible, potentially accounting for
uncoordinated charging
Figure R.15 shows an example winter day in 2050, showing hourly electricity
demand in BC with coordinated and uncoordinated EV charging. The
emergence of hydrogen as a new source of electricity demand requires
building more electricity generation capacity. However, hydrogen production
is a flexible source of electricity demand. During periods of high demand,
hydrogen production using electricity can be reduced to accommodate
the needs of the electricity system. That flexibility allows the electricity
systems in several regions to accommodate the higher peak demand in the
Uncoordinated Charging Case without significant additional investment in
generating capacity.
We project that many provinces utilize this flexibility in both the Global Net-
zero Scenario and Uncoordinated Charging Case to offset peak periods of
demand. Without this demand flexibility, the difference in peak demand in
the two scenarios would have been higher, requiring more investment in new
generation in the Uncoordinated Charging Case.
Figure R.15:
Example daily hourly electricity demand in British Columbia by use, winter
of 2050, Global Net-zero Scenario and Uncoordinated Charging Case
67
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORWind generation increases while solar decreases in the Uncoordinated
Charging Case
As shown in Figure R.16, compared to the Global Net-zero Scenario, we project
more wind and less solar generation in the Uncoordinated Charging Case. In
this case, electricity use is higher during the early evening and lower during the
day. Because solar generates more during the day than in the evening, solar
generation is less valuable in the Uncoordinated Charging Case relative to the
Global Net-zero Scenario and less solar generation is built. Conversely, wind
tends to blow more during the evening period, so becomes a more valuable
asset to the electricity system in the Uncoordinated Charging Case. By 2050,
wind generation is 4% higher in the Uncoordinated Charging Case compared to
the Global Net-zero Scenario, while solar generation is 32% lower. Natural gas without CCUS is used more often in the Uncoordinated
Charging Case
Finally, in some provinces, we project higher generation from natural gas with and
without CCUS. To accommodate the highest peaks in generation throughout
the year, some provinces have natural gas-generating facilities without CCUS
that are utilized very rarely in the Global Net-zero Scenario. In the Uncoordinated
Charging Case these assets are utilized more often in order to meet higher and
more frequent peaks in electricity demand. As a result of more frequent natural
gas use, there are slightly higher GHG emissions from the electricity sector in the
Uncoordinated Charging Case.
Greater use of EVs, along with greater electricity use across the energy system,
would likely require investments in local distribution system infrastructure to
ensure sufficient capacity to deliver electricity during high demand periods.
This need for additional infrastructure could be increased by uncoordinated EV
charging, but this is beyond the scope of this analysis. The analysis in EF2023,
and in this “What if,” focuses on the bulk power system and does not model local
electricity distribution systems.
Figure R.16:
Difference in generation between the Global Net-zero Scenario
and the Uncoordinated Charging Case in 2050, by select fuel
68
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORElectricity production
To meet rapidly growing electricity demand while also decarbonizing electricity
production, we project significant changes to Canada’s electricity system in both
net-zero scenarios. Our assumptions about policies like carbon pricing and the
proposed Clean Electricity Regulations mean that almost all electricity-generating
facilities built over the projection period are low- or non-emitting, or even net-
negative in terms of GHG emissions. Given the diversity of Canada’s electricity
system today, there is considerable variety in how each region’s electricity system
evolves in our net-zero scenarios. Technologies deployed include wind, solar,
hydro, nuclear, fossil fuel with CCUS, and BECCS. Meanwhile, power generation
from coal and natural gas not equipped with CCUS drops quickly over the first
decade of the projection and is near zero after 2035. Figure R.17 shows the
difference in capacity, by fuel, from 2021 to 2050 in the Global Net-zero Scenario.Figure R.17:
Change in electricity capacity from 2021 to 2050, by fuel,
Global Net-zero Scenario
Figure R.18:
Electricity generation by fuel, all scenarios
We project that electricity production grows more slowly in the Current Measures
Scenario when compared to the net-zero scenarios. There are also fewer policies
aimed at reducing the sector’s GHG emissions. Still, while not as dramatic as in
the net-zero scenarios, in-place policies, along with our assumptions of modest
technology cost improvements, result in strong growth in low-emitting generation
sources. Figure R.18 shows electricity generation by fuel in each scenario.69
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORWind and solar
In all three of the scenarios in EF2023, we project substantial growth of wind
generation and steady growth of solar. Our modeling suggests that the low
capital and operating costs of both resources make them among the most
attractive options for utilities and power producers to increase electricity
generation to meet growing demand while also reducing GHG emissions.
Onshore wind generation increases significantly in all scenarios
Electricity generation from onshore wind increases the most among all generation
technologies considered in our analysis. We project that wind generation grows
ninefold in both the Global and Canada Net-zero scenarios, making up over a
quarter of all electricity produced in Canada by 2050. In the Current Measures
Scenario, wind generation does not grow as quickly as in the net-zero scenarios,
but still increases substantially from current levels, and seven times higher
by 2050.
Onshore wind generation grows the most in Alberta, Saskatchewan, and Ontario.
This is in part due to strong wind resources in these provinces. In addition, wind
generation often matches periods of high electricity demand in these regions,
making the energy it generates particularly valuable. For example, in Alberta, it
is often windier during the winter, coinciding with periods when demand from
electric heat pumps is also high.
Offshore wind grows in both net-zero scenarios
This technology currently not deployed in Canada, but increasingly used in
Europe and Asia. Grid-connected offshore generation reaches 23 TWh by 2050.
All of that generation comes from offshore wind facilities15 built off the coast of
Nova Scotia. As we discuss in the hydrogen section, additional offshore wind
capacity is built off the coast of Nova Scotia and Newfoundland & Labrador and
is directly connected to hydrogen electrolysis facilities aiming to export hydrogen
to international markets.
15 The CER is the federal regulator responsible for exploration, construction, operation, and decommissioning activities related to renewable energy projects and power lines in Canada’s offshore areas.
Any inclusion of offshore wind in our projections has no bearing on any regulatory proceeding before the CER related to the development of offshore renewable energy.
70
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORSolar generation grows steadily in all three scenarios
Like wind, solar generation becomes one of the most economic choices for
utilities and power producers in most regions. In the Global Net-zero Scenario,
utility-scale solar generation becomes an important aspect of the electricity
system in many provinces, with total Canadian generation growing from 2.5 TWh
of generation in 2021 to 50 TWh in 2050. By 2050, solar generation makes up
around 5% of total electricity generation in both the Global and Canada Net-zero
scenarios. In the Current Measures Scenario, solar generation grows at a similar
rate as in the net-zero scenarios.
We also project steady growth of distributed solar generation installed primarily
on rooftops of residential and commercial buildings. The growth is driven by
declining costs and supporting policies such as net-zero building policies and
voluntary actions by companies to reduce their environmental footprint. Total
installed rooftop capacity reaches 8.2 GW by 2050, meeting 2.5% of residential
and commercial electricity demand in the Global Net-zero Scenario. Figure R.19
shows generation from wind and solar in the Global Net-zero Scenario.Matching electricity supply and demand
Compared to most power generation technologies, wind and solar are unique in
that their power output is tied to weather patterns, specifically wind speeds and
sunlight. Other generating technologies, like hydroelectric or fossil fuel-based
generation, can usually adjust their output, although different resources can
adjust more quickly and cost effectively than others. This adjustment is important,
because electricity systems must constantly balance electricity production and
consumption in real time.
Electricity consumption can vary significantly over a day and from season
to season in response to factors like the patterns of daily life and weather
conditions. Wind and solar become important sources of bulk power in all our
scenarios but adjustable sources of power remain critical to balancing electricity
systems. Our modeling takes this necessity into account, ensuring the electricity
needs of users are met, and regional electricity demand and supply are in
balance on an hourly basis. Figure R.20 shows our projections of hourly electricity
demand and generation on two typical days in Alberta in the summer and the
winter of 2050.
Figure R.20:
Example hourly electricity supply and demand in Alberta for a day in
summer and winter, 2050, Global Net-zero Scenario
Figure R.19:
Generation from onshore wind, offshore wind, and solar,
Global Net-zero Scenario
71
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORHydroelectricity
Hydroelectricity is currently the core of many provincial electricity systems,
making up 90% or more of generation in Newfoundland and Labrador, Manitoba,
Quebec, and BC. Hydroelectric generation is emission-free, and most facilities
can vary power generation to help grids balance electricity supply and demand.
Hydroelectric generation grows steadily and at a similar rate in all three
scenarios
Hydroelectric generation increases around 26% from 2021 to 2050 in each
scenario. Total hydroelectric generation as a share of total Canadian generation
falls from 61% in 2021 to 38% in 2050 in the Global Net-zero Scenario, as other
generation sources increase more quickly. Our projections of hydroelectric power
include the Site C project in BC, which is currently under construction. Our
technology cost assumptions indicate that building a new hydroelectric facility is
relatively expensive compared to many other options.
Most growth in hydroelectric power occurs in provinces with existing
hydroelectric facilities
The geography of those regions presents more opportunities for additional
hydroelectric projects or expansions. In both net-zero scenarios, hydroelectric
generating capacity increases the most in Quebec (+11% from 2021 to 2050)
and Manitoba (+40%). Most hydroelectricity growth comes from projects that are
currently under construction and projected new developments. The remainder
comes from upgrades to existing hydroelectricity units.
72
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORNuclear
Nuclear power is a key component of Ontario and New Brunswick’s electricity
systems. Nationally, nuclear power generation made up 14% of total electricity
generation in 2021.
In all three scenarios, we project nuclear generation to vary over time as some
of the large nuclear facilities are refurbished, meaning the units are modernized
to extend their usable life. We assume Ontario’s nuclear fleet is refurbished as
per the schedule laid out by the Ontario Independent System Operator in its
2022 Annual Planning Outlook.Figure R.21:
Nuclear generation by technology, Global Net-zero Scenario
Small modular reactors (SMRs) increase significantly in both net-zero
scenarios
In all three scenarios, we do not project any new large-scale nuclear facilities are
built over the projection period, as other generation technologies more cost-
effectively meet growing electricity demand given our assumptions. However,
in both net-zero scenarios, we project considerable growth for small modular
reactors (SMRs), particularly in the 2035 to 2050 period. Along with renewable
technologies, these nuclear SMR units play a pivotal role in Canada’s electricity
system in the net-zero scenarios. By 2050, generation from SMRs make up
12% of total electricity generation by 2050 in both net-zero scenarios, with large
additions in Ontario, Alberta, and BC. In the Current Measures Scenario, nuclear
generation remains close to current levels through much of the projection period,
with very limited growth in SMRs. Figure R.21 shows nuclear generation over the
projection period in the Global Net-zero Scenario.73
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORWhat if small modular reactor (SMR) technology matures less quickly and is more costly?
Canada has a long history with nuclear power, with three large-scale power
facilities operating in Ontario, and one in New Brunswick. About 14%, or 82
TWh, of Canada’s electricity came from nuclear power in 2021. Recently,
some governments, utilities, and power producers have focused on SMRs as
a potential way to meet future electricity demand growth with a carbon-free
generation option. In 2020, the Government of Canada released its SMR Action
Plan, and in 2022 the governments of Ontario, Saskatchewan, New Brunswick,
and Alberta released A Strategic Plan for the Deployment of SMRs. In the fall of
2022, Ontario Power Generation began site preparation activities and applied to
the Canada Canadian Nuclear Safety Commission for a license to construct an
SMR at the existing Darlington nuclear site.
SMRs are an emerging class of nuclear reactors that are smaller than
conventional nuclear power plants in terms of size and power output. The
modular aspect of SMRs means many components of a facility are factory-built,
shortening plant construction times. SMRs can be used to generate electricity
and to produce steam for some industrial applications such as in-situ oil sands
operations.
SMR building costs fall and generation increases in the
Global Net-zero Scenario
In EF2023, our electricity sector analysis relies on assumptions about the
costs of various technologies. The electricity model then projects the future
electricity generating mix based on the demand for electricity and the costs and
characteristics of a wide range of options to generate electricity. In the Global
Net-zero Scenario, we assume the capital cost of building and connecting a new
SMR to the grid is 2022$9,180 per installed kilowatt (kW) of capacity in 2030,
falling to 2022$7,080/kW in 2050. Given these assumptions, and the costs and characteristics of other generating
facilities, we project nuclear power generation to more than double from current
levels by 2050 in the Global Net-zero Scenario. All of that growth is from SMRs,
which are almost all built in the post-2035 period. About 52% of this growth
occurs in Ontario, where the nuclear industry is already well-established, along
with notable additions of SMRs in Quebec, BC, and Alberta.
Low SMR Case: “What if” SMR building costs remain high?
As SMRs are an emerging technology, there is considerable uncertainty as to
how much the technology will ultimately cost, especially 25 years or more in the
future. To explore this uncertainty, we modeled the Low SMR Case, where we
assume higher capital costs for SMRs than in the Global Net-zero Scenario. In
the Low SMR Case, we assume that the capital cost of building a new SMR is
2022$10,170/kW in 2030, falling to 2022$9,173/kW in 2050.
The results of this analysis suggest that higher costs for SMRs translates into
less investment in SMRs and greater deployment of a variety of other generating
technologies. Generation from SMRs is 34% lower in the Low SMR Case than
in the Global Net-zero Scenario. The share of generation from SMRs by 2050 in
the Low SMR Case is 9% of total generation in Canada, compared to 12% in the
Global Net-zero Scenario. 74
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOROther types of electricity generation increase in the Low SMR Case
Lower use of SMRs to meet electricity demand affects the broader electricity mix.
Compared to the Global Net-zero Scenario, the installed capacity and generation
of almost all other forms of generation increase in the Low SMR Case, with the
largest increases in wind and natural gas with CCUS, as shown in Figure R.22.
In the Global Net-zero Scenario, SMRs played a role in supporting the electricity
system as a flexible source of electricity production. In the Low SMR Case, more
of this flexible generation comes from natural gas with CCUS.
Figure R.22
Difference in generation between the Global Net-zero Scenario
and the Low SMR Case in 2050, by select fuel
Given the emerging nature of SMRs, there is uncertainty in the role they will play
in achieving net-zero emissions by 2050. This “What if” analysis shows that lower
use of SMRs results in an increased capacity and generation from a diverse mix
of technologies. However, the overall GHG emissions from Canada's electricity
sector in the Low SMR Case still remain close to the Global Net-Zero Scenario.
75
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORIn the Current Measures Scenario, unabated natural gas-fired generation
increases steadily. Natural gas-fired generation grows by 38% from 2021 to
2050, making up 11% of total generation at the end of the projection period.
We do not project any natural gas generating units with CCUS in the Current
Measures Scenario. Figure R.23:
Fossil fuel generation by fuel, Global Net-zero Scenario
Fossil fuels
All provinces and territories have some fossil fuels in their electricity generation
mix, and in 2021, 18% of all electricity generated in Canada came from facilities
powered by fossil fuels, including coal, natural gas, and RPPs. The majority of
generation in Nova Scotia, Alberta, Saskatchewan, Nunavut, and the Northwest
Territories was fossil fuel based.
Unabated fossil fuels remain only for emergencies in the net-zero scenarios
In both net-zero scenarios, we project that generation from coal is completely
phased out by 2030. This phase-out, along with steady growth in electricity use,
means natural gas-fired electricity generation increases early in our projections.
We also project unabated fossil fuel generation, meaning no CCUS is used to
capture emissions, is nearly zero after 2030. Our assumptions about policies and
costs of other technologies mean low- and non-emitting power sources are the
most cost-effective option for generating electricity. Some unabated generation
facilities remain online throughout the projection period, providing an option for
emergency generation if required. The share of unabated fossil fuel generation
falls from 18% in 2021 to 2% by 2035, and further decline to less than 1% of
generation in 2050. An exception is the Territories and other remote and northern
regions, where many communities rely solely on diesel-fired generation.
Natural gas with CCUS is a flexible power source in the net-zero scenarios
While unabated fossil fuel generation is largely phased-out in the net-zero
scenarios, natural gas-fired generation combined with CCUS becomes an
important part of the generation mix in some regions. Natural gas with CCUS
is first deployed in 2030 and grows steadily throughout the projection period,
reaching 69 TWh by 2050. While more expensive compared to wind and solar
per unit of electricity generated, natural gas with CCUS is a flexible source
of power, meaning it plays an important role in balancing electricity systems,
particularly those that do not have many other flexible options. Most additions of
natural gas with CCUS are in Alberta, Saskatchewan, and Ontario. Figure R.23
shows fossil fuel generation by fuel in the Global Net-zero Scenario.76
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORBiomass
In 2021, just over 2% of Canada’s electricity is generated from biomass, much of
which is in BC. Biomass and biofuel combustion releases CO2 that was originally
captured and stored in plant matter. Plants release this stored CO2 when they
die naturally. As a result, we consider biomass and bioenergy a low-carbon
source of energy when well managed. In both net-zero scenarios, bioenergy with
carbon capture and storage (BECCS), becomes a key technology that supports
decarbonization of the electricity sector and Canada as a whole. Generating
electricity using BECSS can result in negative GHG emissions by permanently
storing carbon that would otherwise be temporarily stored in plants. As a result,
BECCS generation serves a dual purpose in the energy system, providing
electricity to the grid and offering a source of negative emissions. We assume
those negative emissions can then be sold to other power producers or industries
outside of the power sector aiming to offset their GHG emissions.
Negative emissions from BECCS plays an important role in both
net-zero scenarios
In the Global Net-zero Scenario, BECCS generation begins in 2035 and grows
to reach 51 TWh in 2050, or 4% of total generation. The negative emissions
resulting from BECCS are 9 MT in 2035, and 41 MT by 2050 in both net-zero
scenarios. We discuss total GHG emissions from the electricity sector later in this
section.
In both net-zero scenarios, bioenergy plays an increasingly important role, in
electricity as well as in the entire energy system. However, the annual availability
of sustainable biomass feedstocks is limited by biological constraints and
competition with other economic sectors like forestry and agriculture. An analysis
of available biomass resources and our projections of its usage within Canada’s
energy system shows that the bioenergy used for electricity generation is well
within the total resource supply. Hydrogen
Hydrogen can be used to generate non-emitting electricity. The hydrogen is
combusted to turn a turbine, much like a natural gas-fired facility. Currently there
is no hydrogen-powered electricity generation in Canada.
In the Global Net-zero Scenario, we do not project any hydrogen use in the
power sector as other generating technologies meet the power system’s needs
at a lower cost. However, in the Canada Net-zero Scenario, we project a small
amount of hydrogen-fueled electricity generation in Alberta late in the projection
period. The higher cost of carbon pollution in that scenario makes hydrogen an
attractive power generation option in Alberta during peak demand periods. In
addition, electricity demand is higher in Alberta in the Canada Net-zero Scenario
compared to the Global Net-zero Scenario due to higher oil and natural gas
production, increasing electricity demand. Hydrogen generation in Alberta
reaches 1.4 TWh, or just less than 1% of total Albertan generation in 2050.
77
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORStorage
Storage of electricity, either directly in batteries or other forms like compressed
air or pumped hydro storage, can help balance electricity supply and demand.
It allows electricity to be stored during times of high production or low use, and
then be used when production is low, or use is high. Storage provides a source
of complimentary electricity to renewable power sources like wind and solar.
Currently, a number of provinces have grid-connected battery storage systems
including about 90 MW in Alberta and 50 MW in Ontario.
In both net-zero scenarios, we project growth in battery storage, while other
forms of storage are not built. By 2030, we project 1.5 GW of battery storage
in the Global Net-zero Scenario, reaching 9 GW by 2050. There is no battery
storage built in the Current Measures Scenario.
In EF2023, our electricity modeling focuses primarily on electricity supply and
demand. As a result, the incentive to build battery storage facilities is based on
storing inexpensive power and then discharging it later at a higher price. Batteries
can also provide other functions that support the electricity system, like short-
term reliability services. The potential for additional revenue from these services
could increase the attractiveness of battery storage beyond what we model in
EF2023. In addition, hydrogen production using electricity is an important source
of flexible demand in our net-zero scenarios. This source of flexibility provides
similar grid-balancing functionality as other storage options. Lower hydrogen
production using electricity would mean there is more need for grid-balancing
options and could result in greater need for battery and other storage options.
78
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORTrade and transmission
Canada is a net exporter of electricity to the U.S., and electricity is also traded
between provinces, mainly in eastern Canada. In 2021, Canada exported 60 TWh
of electricity and imported 13 TWh. The total aggregated interprovincial electricity
flows in 2021 was 47 TWh.
In both net-zero scenarios, net exports of electricity to the U.S. fall
modestly from current levels
This decline is in response to growing Canadian electricity demand. Meanwhile,
we project the aggregate interprovincial trade increases by about 16% in 2050
compared to 2021 levels, facilitated by some additional transmission capacity
between provinces. By connecting the electricity grids of different regions, grid
operators can take advantage of regional differences in electricity mixes, available
variable renewable energy, and periods of peak electricity demand. Without
additional transmission capacity, some individual provinces could need to install
more generation or storage capacity than we project in both net-zero scenarios.
In the Current Measures Scenario, interprovincial electricity trade grows more
slowly. Figure R.24 shows our projections of net exports out of Canada and
aggregate interprovincial trade volumes in the Global Net-zero Scenario.
International and interprovincial trade remains relatively small when compared to
total generation.
Electricity market developments in the U.S. may evolve differently than our
projections. More, or less, exports could increase or decrease the incentive to
build additional generation capacity in Canada. Likewise, the extent to which
additional interprovincial electricity capacity is built would influence the extent
provinces can benefit from trade with neighboring provinces and alter how much
generation must be built in those provinces to meet growing electricity demand.Figure R.24:
Net exports of electricity and interprovincial trade,
Global Net-zero Scenario
79
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOR
Electricity production in the Territories and other remote
and northern regions
Electricity systems in the Territories and remote and northern regions of some
provinces are unique. These regions are not connected to the North American
electricity grid, and in many communities, electricity is generated from small
diesel-fired stations.
Diesel remains the main fuel source for the Territories in both net-zero
scenarios
Electricity generation in Yukon and Northwest Territories is a mix of hydro, natural
gas, and diesel-fired generation, and in Nunavut, diesel generation is the sole
source of electricity. Combined, the Territories make up less than 1% of Canada’s
total electricity generation. In both net-zero scenarios, we project that the current
forms of electricity in each territory remain the main sources over the projection
period. Currently, diesel is often relied upon in remote communities because it is
transportable, energy-dense, and readily available. However, the remoteness of
communities can create supply security issues and high transportation costs for
fuel. Diesel is also often used for space heating in addition to electricity generation
in many of those regions.
Some diesel consumption is offset with wind and solar generation built over
the projection period. Combined, the Territories add 86 MW of wind over the
projection period, and 118 MW of solar.16 Together these represent 18% of
generation in the territories by 2050.
16 The CER’s Market Snapshot: Clean Energy Projects in Remote Indigenous and Northern Communities provides details on upcoming clean energy projects in these regions. 80
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOREnergy use associated with electricity generation
Energy used to generate electricity made up a quarter of total primary energy use
in Canada in 2021. We project energy use by the electricity sector to increase
nearly 90% by 2050 in the Global Net-zero Scenario, 100% in the Canada Net-
zero Scenario, and 30% Current Measures Scenario. Figure R.25 shows our
projection of energy use to generate electricity in the Global Net-zero Scenario.GHG emissions associated with electricity generation
We project that GHG emissions from the electricity sector, which made up 8%
of Canada’s emissions in 2021, reaches net-zero by 2035 in both net-zero
scenarios. After 2035, the electricity sector becomes a net-negative emitter,
resulting in net-negative emissions of 36 MT by 2050 in the Global Net-zero
Scenario, and 35 MT in the Canada Net-zero Scenario. Some types of generation
result in positive emissions throughout the projection period, including the fraction
of emissions CCUS does not capture, diesel generation in remote and northern
communities, and limited amounts of unabated natural gas-fired generation.
Figure R.26 shows GHG emissions of the electricity sector by fuel in the Global
Net-zero Scenario.Figure R.25:
Energy use to generate electricity by fuel,
Global Net-zero Scenario
Figure R.26:
GHG emissions from electricity generation, by fuel,
Global Net-zero Scenario
81
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOR
KEY UNCERTAINTIES
Electricity
• Export markets: Electricity market developments in the U.S. will
impact the development of Canada’s electricity system. Higher
or lower integration with the U.S. power system than we project
could impact the amount and type of new electricity generation
built in Canada.
• Electricity transmission: While our projections suggest building
electricity transmission between provinces results in lower total
system costs in both net-zero scenarios, building large-scale
electricity transmission will be influenced by a diverse range of
factors. Less transmission would change the electricity investment
outcomes in our scenarios.
• Societal preferences: Electricity generation can have positive
and negative impacts on the communities around them, including
particulate emissions, safety concerns, visual impacts, and
competition with other land uses. These factors will influence
future electricity outcomes, but are beyond the scope of EF2023.
82
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOROil and natural gas production
Crude oil, natural gas, and natural gas liquids (NGLs) are produced in Canada
for domestic use as well as for export. Most of Canada’s crude oil is produced
in Alberta, along with significant volumes from Saskatchewan and offshore
Newfoundland and Labrador. Nearly all of Canada’s natural gas production is
from Alberta and BC.
In this analysis, we project crude oil, natural gas, and NGL production by
simulating investment and operational decisions of producers based on our
assumptions about international and domestic crude oil and natural gas prices,
applicable policies, resource characteristics, and the costs of production,
including the costs of various technologies to reduce emissions. The prices of
crude oil and natural gas that we assume account for the global supply and
demand balance in each scenario. We assume that if Canadian producers can
earn a profit, they choose to produce oil and gas.Crude oil
Canadian crude oil production has been growing steadily for many years,
increasing 87% from 2005 to 2019. Production declined by 5% in 2020, largely
due to the COVID-19 pandemic. In 2021, production started increasing again and
averaged 4.9 million barrels per day (MMb/d) (781 thousand cubic metres per day
(10³m³/d)). Production grew again in 2022 and reached its highest level ever at
5.0 MMb/d (800 103m3/d).
Crude oil production declines in the long term in both net-zero scenarios
Total crude oil production continues to increase after 2022 in all three scenarios
in the near term, because of relatively high prices over that period. However, each
scenario evolves very differently in the medium and long term. Figure R.27 shows
total crude oil production in all three scenarios.
Figure R.27:
Crude oil production (including condensate and pentanes plus),
all scenarios
83
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORIn the Global Net-zero Scenario, we project that crude oil production peaks in
2026, and then declines steadily thereafter, reaching 1.22 MMb/d (194 103m3/d)
in 2050, a 76% decrease from 2022 levels. In the Canada Net-zero Scenario,
production continues to grow until near the end of the decade before beginning
to decline, falling to 3.92 MMb/d (623 103m3/d) by 2050. In the Current
Measures Scenario, we project production grows to a peak of 6.20 MMb/d
(986 103m3/d) by 2035, and remains just below that level for the remainder of
the projection period.
The differences between these scenarios are mostly explained by the different
assumptions we make about the price of crude oil. We describe these
assumptions in detail in the previous chapter, Scenarios and Assumptions. In
the Global and Canada Net-zero scenarios, we align our assumptions with
crude oil prices from the IEA’s WEO2022 scenarios. In the Global Net-zero
Scenario, we take the global crude oil price from the IEA’s Net Zero Emissions
by 2050 Scenario and in the Canada Net-zero Scenario, we use prices from
the IEA’s Announced Pledges Scenario. The prices we assume in the Current
Measures Scenario are based on a review of price projections by various other
organizations. Table R.2 shows our crude oil price assumptions.
Table R.2:
Brent crude oil price assumptions, all scenarios
2030 2050
Scenario 2022US$ per barrel 2022US$ per barrel
Global Net-zero 35 24
Canada Net-zero 64 60
Current Measures 75 75
Our assumptions about climate policies also affect our projections of crude oil
production. All scenarios include all policies currently in place. In the net-zero scenarios, we include any announced but not-yet-implemented climate policies
to the extent feasible. These policies include the federal methane regulations,
which aim to reduce methane emissions by 75% by 2030, and the oil and gas
emissions cap. In both instances, the final policy design was not available before
our modeling was complete. As a result, we relied on simplifying assumptions to
include these policies in our analysis. Further details on those assumptions are
available in Appendix 1: Domestic Climate Policy Assumptions.
Canadian crude oil production includes three main types of production: oil sands,
conventional, and offshore.KEY TRENDS
Crude oil production
• In the Global Net-zero Scenario, oil production falls by 76% from
2022 to 2050 to 1.22 MMb/d (194 103m3/d) because global oil
demand falls to very low levels, resulting low crude oil prices that
challenge the economic viability of many Canadian producers.
• In the Canada Net-zero Scenario, production falls 22% from 2022
to 2050 to 3.92 MMb/d (623 103m3/d), because oil prices are high
enough to sustain more production.
• CCUS capacity in the oil sands peaks at 27 MT in 2033 in the Global
Net-zero Scenario and 49 MT in 2035 in the Canada Net-zero
Scenario.
• Oil sands emissions fall 94% from 2005 levels by 2050 in Global
Net-zero Scenario and 76% from 2005 levels by 2050 in Canada
Net-zero Scenario.84
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOROil sands production
Oil sands production comes from bitumen deposits located in Alberta, where
bitumen is mined in surface pits or produced using wells and steam (called in-situ
production). The oil sands made up nearly two-thirds of Canadian production
in 2022.
Oil sands production grows at a similar pace in the near term in all three
scenarios
Production is between 4 to 7% higher by 2030 compared to 2022 levels
depending on the scenario. Most of this growth is from a small number of existing
projects who expand their facilities. We project that oil sands production in each
of the three scenarios differs considerably after 2030. These differences are
mainly driven by our assumptions about global crude oil prices, which are lowest
in the Global Net-zero Scenario, higher in the Canada Net-zero Scenario, and
highest in the Current Measures Scenario. In addition, climate policies in each
scenario influence investment decisions, including how producers use technology
to reduce emissions. Figure R.28 shows oil sands production by facility type in
all scenarios.Oil sands production falls after 2030 in the Global Net-zero Scenario
After 2030, oil sands production in the Global Net-zero Scenario begins to
steadily decline. This decline is largely because oil prices fall to 2022US$35
per barrel in 2030 and continue to decrease thereafter. Oil prices fall because
of much lower global demand for oil as more stringent climate policies are
implemented globally, as demonstrated in the IEA’s WEO2022 Net Zero
Emissions by 2050 Scenario. In other words, oil producers around the globe are
facing a rapidly shrinking market. Though falling prices are the dominant factor,
our projections also factor in increasingly strong climate policies in Canada, which
reduce emissions but also increase the costs of production.
Only the most efficient projects produce in 2050 in the Global Net-zero
Scenario
Over the projection period, falling prices make it increasingly difficult for oil sands
producers to recover their operating costs and keep projects running. Operating
costs include fuel, maintenance, royalties paid to provincial governments, carbon
pollution costs (including any remaining carbon pollution after CCUS is installed,
as we assume CCUS captures 90% of emissions from large point sources),
and, when necessary, the cost of diluent so bitumen can be diluted and shipped
on pipelines. In our analysis, shortly after the total operating costs of a facility
exceeds its revenue, it shuts down for the remainder of the projection period. Oil
sands facilities that have the highest operating costs begin shutting down early
in the 2030s. As oil prices continue to drop, more and more facilities shut down
production, and only the lowest-cost projects are still producing in 2050. Oil
sands production falls to 1.59 MMb/d (252 103m3/d) in 2040 and 0.58 MMb/d
(91 103m3/d) in 2050, or 83% lower than in 2022. In-situ production falls faster
than mining production because in-situ projects are more emissions-intensive,
meaning they have higher carbon costs than oil sands mines.Figure R.28:
Oil sands production by type, all scenarios
85
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOR
Production declines less and more slowly in the Canada Net-zero scenario
In the Canada Net-zero Scenario, oil sands production also declines after 2030,
but at a slower rate compared to the Global Net-zero Scenario. While global
demand for oil falls in the IEA’s WEO2022 Announced Pledges Scenario, demand
is still much higher than in their Net Zero Emissions by 2050 Scenario, meaning
oil prices are much higher. In the Canada Net-zero Scenario, oil sands production
decreases in line with the gradual natural declines in production exhibited by
oil sands projects, which become more mature over the projection period.
Production in the Canada Net-zero Scenario falls from a peak of nearly 3.64
MMb/d (579 103m3/d) in 2030 to 2.30 MMb/d (366 103m3/d) by 2050, or 30%
lower than 2022. Like in the Global Net-zero Scenario, in-situ production falls
faster than mining production.
Oil sands production grows steadily in the Current Measures Scenario
In the Current Measures Scenario, we project that higher global prices and less
stringent future climate policies result in continued growth in oil sands production
over the projection period. Expansions of existing projects leads to much of the
growth, with some greenfield projects also coming online. Oil sands production
rises from 3.29 MMb/d (523 103m3/d) in 2022 to 3.73 MMb/d (593 103m3/d) in
2030 and largely holds steady, reaching 3.59 MMb/d (571 103m3/d) by 2050.Oil sands producers significantly reduce emissions in both net-zero
scenarios
This is due to increasingly strong climate policies, which cause oil sands
producers to deploy emission-reduction technology. The primary source of GHG
emissions from the oil sands is from burning natural gas, which is used to boil
water to create steam for in-situ production and to create hydrogen to upgrade
bitumen into synthetic crude oil.
Our modeling projects that CCUS is the most economic choice for many oil
sands producers to reduce emissions. We project that oil sands producers
retrofit existing projects with CCUS early in the projection period in both net-zero
scenarios and install it on any new projects. In the Current Measures Scenario,
only a small amount of CCUS is installed. Other decarbonization technologies
have potential, like using solvents to help with bitumen recovery or SMRs to
generate heat without using natural gas. Given our assumptions about the costs
and characteristics of different technologies, CCUS is the primary choice for oil
sands producers in both net-zero scenarios. However, our projections could
show different decarbonization pathways if these technologies proved less costly
or more effective than we assume.
In the Global Net-zero Scenario, we project that 12.5 MT of CO2 is captured
annually by 2030, increasing to a peak of 22.5 MT by 2036, as shown in Figure
R.29. In the Canada Net-zero Scenario, producers rely even more on CCUS,
mostly because oil sands production remains higher, reaching 15.0 MT of
emissions captured in 2030 and 45.0 MT in 2037. Figure R.29:
GHGs captured and permanently stored from the oil sands using CCUS,
Global and Canada Net-zero scenarios86
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOROverall, GHG emissions in the oil sands peak at 87 MT per year in 2023 in the
Global Net-zero Scenario before falling to 61 MT per year in 2030 and 4 MT per
year in 2050, a 94% drop from 2005 levels. GHG emissions peak at 88 MT per
year in 2023 in the Canada Net-zero Scenario before falling to 55 MT per year
in 2030 and to 8 MT per year in 2050. Some producers in the Global Net-zero
Scenario choose not to add CCUS because oil prices are too low for them to
install it and recover invested capital, and instead produce what bitumen they can
before they shut down later in the projection period. What if carbon capture, utilization and storage (CCUS) technology
is more expensive?
CCUS is a suite of technologies that capture CO2, typically from the
exhaust of industrial or power facilities. The captured CO2 can then
be permanently stored in geological formations deep underground or
permanently mineralized in cement. CO2 can also be potentially used to
make products like synthetic fuels, rather than storing it. In this “What if”
analysis, we focus on the application of CCUS in the oil sands.
Many modeling exercises have identified CCUS as a key technology
for reducing emissions from sectors where reducing emissions through
other methods like electrification or alternative fuels may be too difficult
or costly. In its Net Zero Emissions by 2050 Scenario, the IEA projects
CCUS will capture 6.2 gigatonnes of CO2 by 2050, or nearly 17% of
global CO2 emissions in 2021. In that scenario, CCUS is mostly used in
industry, power generation, and for hydrogen production.
Canada is currently adding more CCUS projects
In Canada, crude oil producers have been injecting captured CO2 into oil
wells to enhance recovery rates since the early 1980s. Saskatchewan’s
coal-fired Boundary Dam Generating Station added CCUS to one of
its units in 2014 and has captured more than 5 MT of GHG emissions
since. In Alberta, two carbon capture projects, Quest and Alberta
Carbon Trunk Line, were commissioned in 2015 and 2020, respectively,
increasing Alberta’s annual carbon storage capacity to 3 MT by the
end of 2022. Many new projects proposed in Alberta are described
in detail in the CER Market Snapshot: New projects in Alberta could
add significant carbon storage capacity by 2030. To encourage CCUS
deployment, the federal government announced investment tax credits
for CCUS projects that permanently store captured CO2. We include
these tax credits in our analysis.
Photo credit: Suncor87
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORCCUS deployment will depend on costs
In EF2023, we make assumptions about the costs of various technologies,
including CCUS, in our oil sands analysis. The model then simulates the
operational and investment decisions of oil sands producers based on those
assumptions as well as other factors. However, the actual deployment of CCUS
will strongly depend on its eventual costs. The costs we assume could be
optimistic. In this “What if” analysis, we consider what oil sands production and
CCUS deployment in the sector might look like if costs of CCUS are higher and
deployment of CCUS is lower. Table R.3 shows the lifecycle costs we assume
for the construction and operation of a CCUS facility, including the cost of
transporting CO2 in a pipeline, in both net-zero scenarios and for this “What if”
analysis.
Table R.3:
Lifecycle cost of construction and operation of CCUS facilities in the oil
sands, including transportation, Net-zero scenarios and Low CCUS cases
2030 2050
2022$
per tonne2022$
per tonne2022$
per tonne2022$
per tonne
In-situ Upgrading In-situ Upgrading
Global Net-zero and
Canada Net zero
Scenario117 93 95 76
Global Net-zero and
Canada Net-zero
Low CCUS cases233 186 191 152
In this “What if” analysis, the only assumption we change is the cost of CCUS, to
see how sensitive oil sands production and emissions are to changes in CCUS
cost. We keep our assumptions about policies and crude oil prices the same as
in the main net-zero scenarios.In the Global Net-zero Scenario, higher CCUS costs significantly reduce
the use of CCUS
As shown in Figure R.30, producers build much less CCUS in the Global Net-zero
Low CCUS Case than in the original scenario. However, as shown in Figure R.31,
oil sands production is about the same in 2030. From 2030 to 2050, on the
other hand, production falls faster than in the original Global Net-zero Scenario.
More producers choose not to build CCUS and face higher operating costs as
they pay for increasing costs for carbon pollution. Once those operating costs
exceed revenues, projects begin to shut down, and production is 0.47 MMb/d
(74 103m3/d) lower in 2050 in the Global Net-zero Scenario Low CCUS Case.
Emissions are 27% higher than in the original scenario in 2030, because less
CCUS is installed by then, though are 7% lower in 2050, as production is lower.
Figure R.30:
GHG emissions from the oil sands captured using CCUS,
Global Net-zero and Canada Net-zero Scenarios and Low CCUS cases
88
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORProducers delay building CCUS in the Canada Net-zero Scenario
Low CCUS Case
In the Canada Net-zero Scenario Low CCUS Case, producers delay adding
CCUS because of higher costs, but still build similar amounts by 2050 as in
the original scenario as CCUS costs decrease over time. Production from
the oil sands is slightly lower in the original scenario, because while oil prices
are high enough to keep existing projects running, there is somewhat lower
investment in expanding production. Emissions are 33% higher in 2030 than
in the original scenario, while they are roughly the same by 2050.
Figure R.31:
Oil sands production by type, Global and Canada
Net-zero scenario, and total oil sands production, Low CCUS casesConventional onshore oil production
Alberta and Saskatchewan produce most onshore, conventional crude oil in
Canada, with smaller amounts of production from Manitoba, BC, Northwest
Territories, and Ontario. Conventional production was 1.01 MMb/d (160 103m3/d)
in 2022. Conventional crude oil can be classified as light or heavy, depending
on the density of the oil. Western Canadian conventional crude oil production
is roughly half light and half heavy. Figure R.32 shows conventional crude oil
production in all three scenarios, and production by type in the Global
Net-zero Scenario.
Figure R.32:
Conventional onshore oil production by province and type,
Global Net-zero Scenario
In all three scenarios, conventional crude oil production increases toward 2025
as relatively high prices sustain drilling activity and production. Much of this
growth is from tight oil in Alberta and Saskatchewan, and heavy oil production
in Saskatchewan, particularly from thermal oil projects.
89
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORConventional oil production declines after 2026 in the
Global Net-zero Scenario
We project production to peak relatively soon in the Global Net-zero Scenario,
reaching 1.18 MMb/d (188 103m3/d) by 2026. After 2026, production declines
steadily through the remainder of the projection period. Steadily declining crude
oil prices reduces revenues for oil producers and results in less drilling for new
production in following years, meaning not enough new production comes online
to replace production declines in existing wells. By 2050, conventional crude oil
production is 0.47 MMb/d (74 103m3/d), 54% lower than in 2022. Most of the
remaining production in 2050 is light crude oil, mainly because of declines in
heavy oil production.
Production remains steady in the Canada Net-zero Scenario,
and grows in the Current Measures Scenario
Conventional production continues to increase in the medium term in the Canada
Net-zero Scenario, largely due to higher crude oil prices. Production increases
gradually, reaching 1.22 MMb/d (195 103m3/d) 2030 and staying near those
levels until 2050. Conventional crude oil production grows the most in Current
Measures Scenario, rising to 1.60 MMb/d (255 103m3/d) in 2050.Conventional oil is more resilient compared with the oil sands
in the Canada Net-zero Scenario
Overall, in the Canada Net Zero Scenario, conventional production remains
relatively resilient when compared to oil sands production, which falls. This is
largely because the two sectors have very different cost structures and produce
oil very differently. Projects in the oil sands have very high up-front costs and
take years to build. In addition, oil sands production rates tend to decline slowly
over the multi-decade life of a project, though this decline can be slowed if
additional capital is invested. These factors mean that oil sands projects are built
on the basis of recovering their upfront investments over a long period of time,
and project proponents must consider the long-term uncertainty about global
oil demand and crude oil prices in their investment decisions. Conventional
producers, on the other hand, have a shorter time horizon to consider in their
investment decisions. This is because tight oil wells, which make up most
conventional wells being drilled today and over the projection period, produce
most of their oil in the first few years after being drilled. In the Canada Net Zero
Scenario, conventional producers respond to relatively high prices by drilling
enough new wells to maintain relatively flat production through most of the
projection period.
In both net-zero scenarios, conventional oil producers reduce emissions in
response to the climate policies that we assume, like regulations to reduce
methane emissions and the oil and gas emissions cap.
Compared to the oil sands, conventional oil production burns relatively little fuel,
although it has higher methane emissions. The exception is Saskatchewan’s
thermal-heavy oil projects, which use natural gas much like Alberta’s in-situ oil
sands projects. In both net-zero scenarios, producers make technological and
process changes, like restricting venting levels from devices like compressors and
implementing leak detection and repair programs. We also project that, where
feasible, the sector uses more electricity for production and processing.
90
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORAvailability of crude oil export pipeline and rail capacity
A key issue for Canada’s energy system over the last ten years has been export
capacity of western Canadian oil export pipelines and crude-by-rail. When total
export capacity is full, price differences between Canadian oil markets and our
export markets expand, particularly during unexpected outages, which causes
western Canadian oil producers to earn less revenue than they otherwise would.
Figure R.33 is a simplified, illustrative comparison of our projected western
Canadian crude oil supply available to export and an illustrative level of total
export capacity from pipelines, planned pipeline expansions, and structural rail.17
Available capacity on existing pipeline systems could be higher or lower than
reflected in Figure R.33, because pipeline systems evolve over time. The level of
structural crude-by-rail could also be higher or lower than reflected in this figure.
Comparing oil available for export and the amount of export capacity helps us
to understand whether pipeline constraints might affect crude oil production.
We do not, however, adjust projected crude oil production or what we assume
for western Canadian oil prices based on potential constraints. That said, our
near-term oil sands projections are largely based on publicly available producer
investment plans, which could include expectations about future export capacity.
Crude oil available for export stays below export capacity in both net-zero
scenarios
In the Global Net-zero Scenario, western Canadian crude oil available for export
rises in the near term before falling after 2030, staying below the total export
capacity throughout the projection period.
In the Canada Net-zero Scenario, western Canadian crude oil available for
export rises more in the near term and remains higher than in the Global Net-
zero Scenario after 2030, though still remains below export capacity. Declining
demand for RPPs demand for RPPs in western Canada reduces demand for
oil at local refineries, which leaves more production available for export. In the
Current Measures Scenario, supply comes close to, but does not exceed,
export capacity for much of the projection period, peaking in 2035, and declining
gradually thereafter.
17 Structural rail refers to crude oil that is exported by rail regardless of a given WCS-WTI differential. Companies may choose to export crude oil by rail in this way due to a number of factors. These include existing contractual
commitments, ownership of the crude-by-rail infrastructure, and the need to access locations not well connected by pipeline.EF2023 does not explore the complex interactions between pipelines,
energy supply, and energy demand
For example, some spare pipeline capacity can benefit crude oil producers by
increasing flexibility as it could help producers more easily switch where they
ship their oil, and therefore find higher values for their production. Spare capacity
can also help ship oil that might otherwise back up into western Canada during
pipeline maintenance or unplanned outages. On the other hand, excess capacity
and long-term underutilization of pipelines could result in higher pipeline tolls
for crude oil producers. Analysis of these considerations is beyond the scope
of EF2023. We caution readers from drawing definitive conclusions from the
illustrative comparison shown Figure R.33.
It is also important to note that estimates of total available pipeline capacity and
the level of structural rail is uncertain and the result of many key assumptions.
Table R.4 describes the assumptions underpinning Figure R.33.
Figure R.33:
Illustrative export capacity from pipelines and structural rail, crude oil
pipeline capacity vs. total supply available for export, all scenarios
91
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORTable R.4:
Pipeline capacity assumptions for Figure R.33
Name Takeaway capacity
(current or timing as
noted) (Mb/d)Capacity assumptions
Enbridge Mainline 3,290 Stated capacity includes the fully completed Line 3 Replacement Project which added 370 Mb/d of capacity to the
Enbridge Mainline in late 2021.
Keystone 590 Capacity held fixed over the projection period. The cancelled Keystone XL project is not included in Figure R.33.
Trans Mountain 300 Capacity is held fixed over the projection period.
Trans Mountain
Expansion590 The Trans Mountain Expansion Project adds capacity starting in the first quarter of 2024 and increases to full capacity a few
months later. This includes use of drag-reducing agents, which increase the capacity of the existing Trans Mountain line by
50 Mb/d.
Express 310 Capacity held fixed over the projection period.
Milk River 97 Capacity held fixed over the projection period.
Aurora/Rangeland 44 Capacity held fixed over the projection period.
Structural Rail 120 Capacity held fixed over the projection period.
Total 5,363
Offshore oil production
Offshore oil production comes from wells drilled in Canada’s offshore areas.
Currently only Newfoundland and Labrador produces offshore oil. Offshore
production was 0.23 MMb/d (37 103m3/d) in 2022. While some production
currently comes from Hibernia and other nearby fields, most offshore production
now comes from the Hebron field, which came online in late 2017.
In all three scenarios, the Bay du Nord offshore project comes online in the late
2020s, increasing Newfoundland and Labrador’s oil production. As shown in
Figure R.34, the amount of production we project from the Bay du Nord facility
varies by scenario, with the least amount of new production coming online in the
Global Net-zero Scenario and the most coming online in the Current Measures
Scenario. This is because oil prices in 2030 and later are lowest in the Global Net-
zero Scenario and highest in the Current Measures Scenario. Figure R.34:
Offshore oil production, all scenarios
92
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORGHG emissions from offshore oil production peak around 2030 in all three
scenarios, and then decrease toward 2050. In particular, GHG emissions decline
faster than production in all three scenarios. This decrease is because older
projects in Newfoundland and Labrador’s offshore tend to have higher emission
intensities and shut down before newer projects, which have lower emission
intensities. This means the average emission intensity for a barrel of offshore oil
falls over time, accelerating the decline in total emissions. Emissions fall to less
than 5% of 2019 levels by 2050 in both net-zero scenarios.
KEY UNCERTAINTIES
Crude oil
• The pace of global climate action: Canada exports most of its
oil production, meaning our producers depend on markets outside
of Canada to buy most of our oil supply. Demand for Canadian
oil depends very strongly on how aggressively the world pursues
emission reductions.
• Technology used to decarbonize the oil sands: In EF2023, the
oil sands mainly use CCUS to decarbonize. However, if CCUS costs,
and the costs of other emission-reduction technology, like solvents
and SMRs, do not significantly fall, or these technologies turn out to
be inadequate, the oil sands may find decarbonization even more
challenging. In a rush to decarbonize the sector, constraints on labour
and supplies might prevent costs from falling as much as we assume.
• Western Canadian export capacity: Export capacity from western
Canada consists of several pipelines, as well as rail and marine
vessels. Interruptions or reductions to pipeline capacity, temporary or
permanent, can affect western Canadian prices and production.
93
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORNatural gas
Alberta and BC produce most of the natural gas in Canada, with smaller
amounts of production from Saskatchewan, Ontario, Northwest Territories, and
New Brunswick. Natural gas production grew from 13.9 billion cubic feet per
day (Bcf/d) (394 million cubic metres per day (106m3/d)) in 2012 to 16.1 Bcf/d
(456 106m3/d) in 2021, and to 17.3 Bcf/d (490 106m3/d) in 2022, because
natural gas and natural gas liquid (NGL) prices rose significantly in 2021 after
Russia invaded Ukraine.
Most natural gas in Canada comes from tight gas, which is from reservoirs that
need to be hydraulically fractured to flow at economic rates. Most tight gas in
Canada comes from the Montney Formation of BC and Alberta. In 2022, the
Montney Formation produced 8.1 Bcf/d (228 106m3/d), just less than half of
Canada’s gas production and up from 0.8 Bcf/d (23 106m3/d) in 2010.Our projections for natural gas production largely depend on price
Prices determine producer revenues and capital available to potentially invest in
drilling new wells from year to year. Like crude oil prices, our natural gas price
assumptions in both net-zero scenarios are from the IEA’s WEO2022 scenarios,
and the assumptions in the Current Measures Scenario are based on a review
of price projections by various other organizations. Table R.5 shows our natural
gas price assumptions. A related factor that influences our projections is the
difference, or differential, between the Henry Hub gas price and local prices in
western Canada. Factors such as bottlenecks on Canadian pipeline systems
have affected this differential in the past. Differentials that vary from what we
assume could cause production to differ from our projections.
Table R.5:
Henry Hub natural gas price assumptions, all scenarios
2030 2050
Scenario 2022US$ per MMBtu 2022US$ per MMBtu
Global Net-zero 2.00 1.80
Canada Net-zero 3.70 2.60
Current Measures 3.75 4.40
Our natural gas projections depend on our assumptions about LNG exports.
We describe our assumptions about LNG in detail in the Scenarios and
Assumption chapter. In the Global Net-zero Scenario, we assume LNG exports
begin in 2025, reaching 2.0 Bcf/d (57 106m³/d) by 2029, and then dropping to
0.3 Bcf/d (8 106m³/d) by 2046 in response to falling LNG demand globally. In
the Canada Net-zero Scenario, LNG exports reach 3.8 Bcf/d (108 106m³/d) by
2030. In the Current Measures Scenario, LNG exports are the highest, reaching
4.6 Bcf/d (131 106m³/d) by 2034.KEY TRENDS
Natural gas production
• In the Global Net-zero Scenario, gas production falls by over two
thirds from 2022 to 2050, mostly because natural gas prices fall to
much lower levels.
• In the Canada Net-zero Scenario, production falls 24% from 2022
to 2050, declining less than in the Global Net-zero Scenario due to
somewhat higher prices for natural gas and higher liquified natural
gas (LNG) export assumptions.
• The Montney Formation produces more than half of Canada’s total
gas production in all three scenarios starting in 2025, and more
than 60% in 2050. Our projections for natural gas production largely
depend on price94
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORIn the Global Net-zero Scenario, Canadian production peaks at 17.4 Bcf/d
(492 106m³/d) in 2023, because of relatively high gas prices in 2021 and 2022.
After staying near those levels until 2026, production steadily falls to 5.5 Bcf/d
(156 106m³/d) in 2050, because of lower investment in drilling new wells.
Producer revenues decrease, largely because of lower natural gas prices, but
also higher costs related to reducing emissions and complying with various
climate policies.
Natural gas production declines in the net-zero scenarios, and rises in the
Current Measures Scenario
In the Canada Net-zero Scenario, production rises to 17.7 Bcf/d (500 106m³/d)
in 2030, because natural gas prices and LNG exports are higher than in the
Global Net-zero Scenario. Production then falls to 11.0 Bcf/d (310 106m³/d)
in 2050, largely because of falling gas prices which reduces producer revenue
and investment in drilling new gas wells. In the Current Measures Scenario, as
gas prices grow from 2023 to 2050, LNG exports are higher than in the other
two scenarios, and climate policies are less stringent than in the two net-zero
scenarios, and production rises to 21.5 Bcf/d (607 106m³/d) in 2050.
Montney Formation production grows and then falls by 2050 in both net-
zero scenarios
In all scenarios, the geographic location of production shifts over the projection
period. BC has grown its share of total Canadian natural gas production
over the past several years and this continues over the projection period, as
shown in Figure R.35. A key driver of this is the growth of production from the
Montney Formation, located in northeast BC and northwest Alberta. Most of
the production from Montney is currently from within BC, and we project that
this continues to be the case over the projection period in all three scenarios. As
shown in Figure R.36, production from the Montney increased from 0.8 Bcf/d
(23 106m3/d, or 6% of Canadian production) in 2010 to 8.1 Bcf/d (228 106m3/d,
or 47% of Canadian production) in 2022. In all three scenarios, the Montney
Formation’s share of production increases steadily, meaning that Canada’s natural
gas production is becoming more concentrated in one area. Production from the
Montney Formation falls to 3.4 Bcf/d (98 106m³/d) in 2050 in the Global Net-
zero Scenario, 6.8 Bcf/d (194 106m³/d) in the Canada Net-zero Scenario, and
increases to 14.8 Bcf/d (420 106m³/d) in the Current Measures Scenario. Figure R.35:
Natural gas production by province, Global Net-zero Scenario,
and total production, Canada Net-zero and Current Measures scenarios
Figure R.36:
Natural gas production by type, Global Net-zero Scenario, and total
production, Canada Net-zero and Current Measures scenarios
95
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOREmissions from natural gas production continue to decline in the net-zero
scenarios
GHG emissions from the production and processing of natural gas peaked in
2007. In the Global Net-zero Scenario, emissions decline to 8 MT in 2050, a
decrease of almost 90% from 2021 levels. This is largely because of falling natural
gas production, but also because of various climate policies, including federal
regulations aiming to reduce methane emissions by 75% by 2030. Electrification
of the sector, where feasible, and the use of CCUS at larger natural gas-
processing plants also contribute to declining emissions. The Canada Net-Zero
Scenario follows a similar trend, with emissions falling to 9 MT in 2050. In the
Current Measures Scenario, emissions decline to 2030 before rising to 42 MT in
2050 as production grows, and because policies do not become more stringent
after 2030. KEY UNCERTAINTIES
Natural gas
• The pace of global climate action: Canada exports much of its
natural gas production, meaning producers depend on markets
outside of Canada to buy our gas supply. Demand for Canadian
gas depends very strongly on how aggressively the world pursues
emission reductions.
• Technology used to decarbonize the oil sands: We project that
CCUS is key to decarbonizing the oil sands, which allows natural
gas to remain the main fuel supply for in-situ oil sands production.
However, other potential technologies exist to decarbonize the oil
sands, like solvents and SMRs, which do not consume natural gas.
We do not project that these technologies are applied in the oil sands
but if they become more attractive, western Canadian demand for
natural gas could significantly fall, reducing natural gas prices and
production. On the other hand, increased demand for solvents like
propane and butanes could increase demand for NGLs, therefore
increasing drilling for natural gas as a result.
• Discounts for western Canadian natural gas: Differentials for
western Canadian natural gas relative to Henry Hub could be affected
by many things, including pipeline bottlenecks.
• LNG exports: Small changes to economics can alter which projects
are built and when, or when projects might shut down. In the Global
Net-zero Scenario, the rapid decline in LNG exports from 2044 to
2046 could happen earlier if Canadian LNG exports are more costly
relative to remaining global LNG supply, or exports could continue
past 2050 if secured through long-term contracts.
96
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORNatural gas liquids
NGLs are produced along with natural gas, as well as from oil sands and refinery
processes. Natural gas production is the main source of NGL production in
Canada. Demand for certain NGLs adds value to natural gas production and
is a driver of natural gas drilling. Raw natural gas at a wellhead is comprised
primarily of methane, but often contains NGLs such as ethane, propane, butanes,
pentanes, and condensate.
Figure R.37:
NGL production, by type, Global Net-zero Scenario, and total NGL
production, Canada Net-zero and Current Measures scenarios
NGL production declines in the net-zero scenarios and grows in the Current
Measures Scenario
Figure R.37 shows total NGL production by type in the Global Net-zero Scenario
along with total combined NGL production in the Canada Net-zero and Current
Measures scenarios. Production grows around 4% from 2022 to 2026 in the
Global Net-zero Scenario, reaching 1.29 MMb/d (205 103m3/d). Much of this
production growth is condensate and pentanes plus. Condensate and pentanes
plus are added to bitumen as a diluent to enable it to flow in pipelines and be
loaded on to rail cars. Steady demand for condensate encourages natural gas
drilling to focus on NGL-rich areas.
As low gas prices reduce gas drilling and gas production, total NGL production
declines after 2030 in the Global Net-zero scenario. NGL production continues to
fall, reaching to 0.46 MMb/d (73 103m3/d) in 2050, 63% lower than in 2022.KEY TRENDS
NGLs
• In the Global Net-zero Scenario, production rises to 1.29 MMb/d
(205 103m3/d) by 2026 before falling to 0.46 MMb/d (73 103m3/d) in
2050 following natural gas production trends.
• NGL production is higher in the Canada Net-zero Scenario,
increasing to 1.45 MMb/d (230 103m3/d) by 2030 before falling to
0.86 MMb/d (136 103m3/d) in 2050.97
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORIn the Canada Net-zero Scenario, NGL production grows by 16% from 2022 to 2030,
and declines gradually through the remainder of the projection period. Like the Global
Net-zero Scenario, NGL production growth is dominated by condensate, though
propane and butanes production grow as well. In the Current Measures Scenario, total
NGL production grows 45% from 2022 to 2050, reaching 1.80 MMb/d (286 10³m³/d).
In this scenario, NGL production growth is a result of natural gas production growth.
KEY UNCERTAINTIES
NGLs
• Natural gas production and LNG exports: NGLs are a byproduct of
natural gas production, and as such, any uncertainty discussed in the
natural gas section applies for NGL projections.
• Oil sands production: The rate at which production grows in the
oil sands, and the amount of diluent blending required, will affect the
demand for condensate. Likewise, if solvents are widely adopted in the
oil sands to reduce GHG emissions, demand for propane and butanes
would increase.
• Petrochemical development: There is potential for ethane recovery
to expand if there is an increase in the ethane extraction capacity and
petrochemical facilities. This increase could be spurred by government
programs, such as royalty credit incentives for petrochemical facilities in
Alberta’s Petrochemicals Diversification Program.
• Global exports: Several large-scale facilities have been approved by
provincial and federal regulators to export some NGLs from the BC
coast. The amount and composition of the NGLs exported at proposed
and existing terminals could impact domestic NGL prices and the
attractiveness of drilling for NGL-rich natural gas.
98
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATOREnergy use in the oil and gas sector
Canadian crude oil, natural gas, and NGLs are large sources of energy for
domestic and international markets. However, the process of producing,
processing, transporting, and refining these products requires a significant
amount of energy. In 2021, the sector used around 3,000 petajoules (PJ) of
energy, 27% of total Canadian end-use energy consumption.18 Most of this
energy was natural gas, not only in the oil sands, but to power oil and gas
wells, natural gas processing, petroleum refining, and gas pipelines. Propane
or electricity is often used to fuel operations at oil and gas wells, and electricity
typically powers oil pipelines.
Over the projection period, the amount of energy used in each scenario is driven
by the amount of future production, how fast energy efficiency improves, and
additional energy used to run CCUS equipment, if any. Also, energy use to refine
petroleum products and transport natural gas to end-users is driven largely by the
domestic demand for those commodities.
In all three scenarios, energy use in the oil and gas sector grows in
the near term
Energy use in the sector peaks in 2023 in the Global Net-zero Scenario and
then falls by 75% by 2050 from 2021 levels, largely in line with falling production
levels. In the Canada Net-zero Scenario, demand falls 47% from 2021 to 2050,
as higher crude oil production results in higher demand for energy in the sector
compared to the Global Net-zero Scenario. In both net-zero scenarios, falling
Canadian demand for RPPs and natural gas reduce energy use for refining and
transporting energy to end-users. Increased deployment of CCUS technology
impacts energy use in both net-zero scenarios. Capturing, compressing, and
transporting CO2 from the exhaust stream of facilities takes energy. By 2050,
energy used to power CCUS makes up 5% of oil and gas sector demands in
the Global Net-zero Scenario, and 7% in the Canada Net-zero Scenario. In the
Current Measures Scenario, efficiency improvements offset increased production
levels and energy required for CCUS, and energy use in 2050 is 6% lower than in
2021. Figure R.38 shows total energy use in the oil and gas sector.
18 This is end-use demand, so excludes on-site electricity generation, which is captured in primary demand.Figure R.38:
Energy use in the oil and gas sector by fuel, 2021 and all scenarios in 2050
99
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORFigure R.39:
GHG emissions in the oil and gas sector, all scenarios
GHG emissions from the oil and gas sector
We describe the trends driving GHG emissions from the oil and gas sector in the
previous sections of this chapter. In total, we project that GHG emissions from
the oil and gas sector in the Global Net-zero Scenario fall from 189 MT in 2021 to
17 MT in 2050, a 90% decrease. In the Canada Net-zero Scenario, emissions fall
to 32 MT in 2050, or 83% lower than 2021 levels. This includes GHG emissions
from the production and transmission of oil and natural gas, and liquefaction of
natural gas, refining of crude oil, and distribution of natural gas to end-users.
In both net-zero scenarios, CCUS and methane mitigation play an important role
reducing emissions in the oil and gas sector. In the Canada Net-zero Scenario,
CCUS is particularly important because production of oil and natural gas is
higher due to higher global demand and oil and gas prices. We also project
some electrification of conventional oil and natural gas production currently
met by fossil fuels. Some GHGs are still emitted in both net-zero scenarios by
2050 but Canada achieves net-zero because of negative emissions occurring in
other sectors.
In the Current Measures Scenario, emissions from the oil and gas sector decline
moderately over the projection to 149 MT in 2050, 21% lower than in 2021. This
scenario has the highest oil and natural gas production. At the same time, our
assumption of limited future climate action in Canada in that scenario means the
industry applies less emission reduction technologies compared to the net-zero
scenarios. 100
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORHydrogen
There is increasing interest in using low-carbon hydrogen as a fuel in both Canada and
globally. Like electricity, hydrogen can be an energy carrier that transports useable energy
created elsewhere to another location. When consumed, hydrogen does not result in GHG
emissions. For more information on the fundamentals of hydrogen, see the Government of
Canada’s Hydrogen Strategy , released in late 2020. Our focus in this section is on hydrogen
use as an energy carrier and its production by methods that emit little or no CO2.
We make projections about hydrogen use by simulating the energy choices of households
and businesses, including the energy technologies and fuels they choose to use. We model
hydrogen production to meet hydrogen use and export requirements. The type of hydrogen
produced to meet that demand is based on technology costs, and the fuel availability and
cost in different regions.
We project that low-emitting hydrogen use reaches over 8.5 MT19 in 2050 in the Global Net-
zero Scenario, about 12% of total energy use demand. In the Canada Net-zero Scenario,
hydrogen use is slightly higher at nearly 9.5 MT. In the Current Measures Scenario, low-
emitting hydrogen demand is less than 1 MT by 2050, as fossil fuels remain an economically
attractive energy source for many applications suitable for hydrogen.
We assume some hydrogen exports in all scenarios, reaching 5 MT in the Global Net-zero
Scenario in 2050, 4.5 MT in the Canada Net-zero Scenario, and 2.5 MT in the Current
Measures Scenario.
19 Hydrogen is typically measured by mass. One MT is equivalent to approximately 120 PJ in energy terms.
KEY TRENDS
Hydrogen
• Hydrogen becomes a significant part of energy use in the net-zero scenarios,
especially in the industrial and transportation sectors.
• Production of low emitting hydrogen comes from a mix of technologies, including
natural gas with CCUS, electrolysis, and biomass gasification.101
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORHydrogen use
There are a wide variety of potential uses for hydrogen as an energy carrier in the
energy system, ranging from transportation fuel, energy for building or industrial
heat, or for electric power generation. Canada currently uses about 3 MT of
hydrogen for industrial applications like oil sands upgrading and chemicals and
fertilizer production. This existing hydrogen is counted as natural gas in Canada’s
energy balances, and in our data appendices. This production uses natural gas
as a feedstock and results in CO2 emissions that are not captured.
As discussed in the Energy Demand section of this chapter, we project hydrogen
to become a key fuel in the heavy freight and industrial sectors in both net-zero
scenarios. In the Global Net-zero Scenario, hydrogen use in transportation
reaches nearly 5 MT by 2050, or nearly 30% of energy use in the transportation
sector. Hydrogen primarily fuels long-haul transportation in heavy trucks, marine
shipping, and hydrogen-based fuels are used to help decarbonize aviation.
Hydrogen is used in industries like chemicals, iron and steel, and petroleum
refining. Total industrial hydrogen use reaches 2.5 MT in the Global Net-zero
Scenario, and 3 MT in the Canada-Net-zero Scenario, by 2050.
In both net-zero scenarios, hydrogen use grows modestly to 2035
and accelerates thereafter
We also project some use of hydrogen for building heating in both net-zero
scenarios, but uptake is limited to blending with natural gas to be used in
a natural gas furnace. However, the market share of natural gas furnaces
declines over the projection period in the net-zero scenarios. As discussed in
the Electricity section, we do not project any hydrogen use in the power sector
in the Global Net-zero Scenario, and a small amount in the Canada Net-zero
Scenario, reaching 0.13 MT by 2050. We also project that hydrogen produced
from natural gas without capturing CO2 declines and is replaced by low-emitting
hydrogen sources. Figure R.40 shows hydrogen demand by end-use in the
Global Net-zero Scenario. In total, hydrogen’s role in Canada’s energy system is
modest until 2035, at which point it accelerates and grows steadily to 2050 in the
net-zero scenarios.Figure R.40:
Hydrogen demand by end-use, Global Net-zero Scenario
102
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORWhat if the technologies to enable wide-scale adoption of hydrogen are more or less costly?
Canada is already one of the world’s largest producers and users of hydrogen.
Most of this occurs in Alberta where hydrogen is produced from natural gas
and is used as a feedstock in various industrial applications. Alberta’s Hydrogen
Roadmap states 55% of production is used for heavy oil upgrading, 38% in the
chemicals sector, and 7% for oil refining. At present, this hydrogen is produced
using natural gas as a feedstock, a process which releases CO2 emissions.
According to the Alberta Energy Regulator, 19% of the hydrogen produced in
Alberta in 2021 was from facilities equipped with CCUS, with the remaining at
facilities venting the CO2 to the atmosphere.
Many companies are actively expanding the production and use of hydrogen
in Canada. An example of a recent project nearing completion is the Varennes
Carbon Recycling plant, currently under construction in Quebec and aiming to
be operational by 2025. The plant will produce biofuels and chemicals and will
include an 87 MW electrolyzer to supply the hydrogen required for the process.
Another example is the Air Products’ Canada Net-Zero Hydrogen Energy
Complex in Alberta, which will use natural gas as a feedstock to produce low-
emission hydrogen using auto-thermal reforming technology, coupled with CCUS.
Federal and provincial governments are supporting the expansion of
hydrogen as a fuel
The federal government, British Columbia, Alberta, Ontario, and Quebec have all
recently developed hydrogen strategies or roadmaps. The federal government
is working to implement an investment tax credit for clean hydrogen and, along
with many provinces, is supporting various proposed projects through technology
funds and incentive programs. In EF2023, we make assumptions about the cost of the technologies used
to produce hydrogen
Along with prices for inputs like natural gas and electricity, these technology
costs translate into the cost of hydrogen we rely on for modeling in our
scenarios. Production costs range from $1.50/kg to 10.50/kg in 2030, and
$1.00/kg to 7.00/kg by 2050, depending on production technologies and
region. Our energy use model then considers how the relative costs of different
fuels impacts household and business decision-making when investing in new
energy-consuming devices. We also make assumptions about technology that
use hydrogen, such as medium- and heavy-duty freight trucks, the amount of
hydrogen blended into natural gas networks, and hydrogen exports.
“What if” hydrogen supply and demand is higher or lower than in the Global
Net-zero Scenario?
We project hydrogen use in Canada reaches 8.5 MT in 2050 in the Global
Net-zero Scenario. However, there is a wide range of factors that could result in
different hydrogen supply and demand in the future, including different costs for
technologies to produce and use hydrogen, and different amounts of hydrogen
produced for export. In this “What If” analysis, we explore the impact on our
projections if the drivers of hydrogen supply and demand are higher or lower
than in the Global Net-zero Scenario. To do so, we modeled the Low and
High Hydrogen cases, each with unique assumptions on hydrogen supply and
demand technology costs, as well as hydrogen produced for export. These are
summarized in Table R.6.103
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORTable R.6:
Hydrogen-specific assumptions, Global Net-zero Scenario and High and Low Hydrogen cases
Global Net-zero Scenario Low Hydrogen Case High Hydrogen Case
Electrolyzer capital cost Capital costs declines 84% by 2050. Capital costs declines only 15% by 2050. Capital costs are 10% lower than the
Global Net-zero scenario in 2050.
Hydrogen production from natural gas
using CCUS capital costCapital costs declines 40% by 2050. Capital costs falls 25% by 2050. Capital costs falls 50% by 2050.
Hydrogen in transportation Fuel cell truck costs fall steadily,
approaching parity with diesel vehicles in
2035-2050 period.Fuel cell truck costs are less competitive
with battery-electric trucks. Hydrogen-
based fuels play a lesser role in shipping
and aviation.Fuel cell truck costs are more competitive
with battery-electric trucks. Hydrogen-
based fuels play a greater role in shipping
and aviation.
Hydrogen blending in natural gas
networksHydrogen blending is 15-20% by volume
for most provinces.Hydrogen blending limited to 5% by
volume.Hydrogen blending limited to 20% by
volume.
Hydrogen produced for export Hydrogen produced for export is 1 MT by
2030 and 5 MT by 2050.Hydrogen produced for export is 1 MT by
2030 and 2.5 MT by 2050.Hydrogen produced for export is 2.5 MT
by 2030 and 8 MT by 2050.
The results of this “What if” analysis suggest that there is a wide range of possible
levels of hydrogen use in the future. The Low Hydrogen Case shows a future
where hydrogen plays a smaller role in Canada reaching net-zero by 2050. The
High Hydrogen Case shows what could happen if hydrogen plays a bigger role in
getting to net-zero. Figure R.41 compares hydrogen use and exports, as well as
the technology used to produce it, in the Low and High Hydrogen cases and the
Global Net-zero Scenario. In 2050, the Low Hydrogen Case shows demand and
exports totaling 5 MT, 60% lower than in the Global Net-zero Scenario. The High
Hydrogen Case shows demand and exports of 20 MT, 55% higher than in the
Global Net-zero Scenario. Figure R.41:
Hydrogen use and production in 2050, Global Net-zero Scenario,
and High and Low Hydrogen cases
104
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORHigher or lower hydrogen use has implications for the overall end-use demand
mix. Figure R.42 compares the end-use demand mix in 2050 for the Global
Net-zero Scenario and the two hydrogen cases. In the Global Net-zero Scenario
hydrogen makes up 12% of end-use demand in 2050, but this increases to
nearly 20% in the High Hydrogen Case and falls to around 4% in the Low
Hydrogen Case. At the end-use level, more hydrogen use in the High Hydrogen
Case reduces electricity and bioenergy demands, while less hydrogen in the
Low Hydrogen Case increases demands for electricity and bioenergy. Of course,
energy is also needed to produce hydrogen, so compared to the Global Net-zero
Scenario, overall demands for electricity and natural gas increase in the High
Hydrogen Case and decrease in the Low Hydrogen Case.
Hydrogen is a versatile fuel that plays a key role in Canada’s energy mix in the
Global Net-zero scenario. At the same time, the adoption of hydrogen within
Canada, and development of export markets for Canadian hydrogen is uncertain.
This “What if” analysis projects a range of potential levels of Canadian hydrogen
demand, and shows that there are important implications for other energy use
trends, including electricity and natural gas.Figure R.42:
End-use demand in 2050, Global Net-zero Scenario and
High and Low Hydrogen cases
105
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORFigure R.43:
Hydrogen production by technology, Global and Canada Net-zero scenarios
Hydrogen production
In EF2023, we model hydrogen production from three technologies:
• Natural gas-based production, which uses steam methane reformation
or autothermal reformation processes. The CO2 resulting from these
processes is then captured and stored using CCUS. This process is
sometimes referred to as blue hydrogen.
• Electrolysis, which uses water as a feedstock and emission-free electricity
as an energy source. This process is sometimes referred to as green
hydrogen.
• Biomass-based production, which uses biomass gasification to produce
hydrogen. The CO2 resulting from these processes may or may not then
be captured and stored using CCUS.
For more information about different types of hydrogen production methods in
Canada and around the globe see the CER Market Snapshot: Hydrogen could be
part of the global path to net-zero.
In the Global Net-zero Scenario, low-emitting hydrogen production is about
2 MT by 2030, increasing to around 14 MT by 2050, with similar trends in the
Canada Net-zero Scenario. By 2050, 32% of hydrogen production is natural
gas-based, 58% is via electrolysis, and the remaining 10% is from biomass.
The relatively high amount of electrolysis production is due to very large
reductions in electrolyzer costs that we assume in the net-zero scenarios, which
makes hydrogen produced from electricity the most cost-effective option in
many regions. In the Current Measures Scenario, hydrogen production growth
is limited, and largely from natural gas with CCUS. Figure R.43 shows hydrogen
production by type of feedstock in both net-zero scenarios. 106
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORHydrogen created with bioenergy and using CCUS results in negative
emissions
Biomass-based production of hydrogen increases to 1.5 MT in 2050 in the Global
Net-zero Scenario. When coupled with CCUS, biomass hydrogen production
results in negative emissions by permanently storing carbon that would otherwise
be temporarily stored in plant matter. In the Global Net-zero Scenario, biomass
hydrogen production results in 23 MT of negative GHG emissions by 2050.
Types of hydrogen production depend on local resources
We project that hydrogen production occurs in many provinces, with large
volumes from Ontario, Alberta, Quebec, and BC. Hydrogen tends to be produced
by electrolysis in regions rich with hydroelectric power, from natural gas in regions
with lower cost natural gas and suitable CCUS storage reservoirs, and from
biomass in regions with large biomass supplies. Notably, while electricity and
hydrogen are both energy carriers, electricity itself is used to create hydrogen in
our scenarios. There are energy losses in the electrolysis process but in some
instances, there are benefits to using hydrogen instead of electricity. This is
because hydrogen is more energy-dense compared to electricity stored in a
battery. This makes it potentially attractive as a fuel for heavy freight compared to
EVs, although this will ultimately depend on the future costs of both hydrogen and
batteries.
Hydrogen exports are supplied with a mix of electrolysis and natural gas
with CCUS
In the Global Net-zero scenario, we assume over 3 MT of hydrogen is provided
by dedicated on- and off-shore wind electricity in Atlantic Canada. These exports
use over 165 TWh of wind electricity per year to produce hydrogen for export
in 2050.20 In the Global Net-zero Scenario, energy used to produce hydrogen
increases to about 20% of total primary energy demand by 2050. Of this energy
use, 60% is electricity (including dedicated renewable projects that produce
hydrogen for our assumed exports), 25% in natural gas, and the remaining
15% is biomass.
20 These volumes of electricity generation are not included in the electricity generation and capacity, or energy demand values, because they are assumed to not be separate from local electricity systems.
The wind energy volumes are captured in the primary demand value discussed in the Energy Demand section.GHG emissions associated with hydrogen production
We project that GHG emissions from hydrogen production for use as an energy
carrier are slightly positive from 2024 to 2032, a result of the fraction of emissions
that are not captured by CCUS when hydrogen is produced from natural gas.
By 2035, some biomass-based hydrogen production is coupled with CCUS and
net emissions from the hydrogen sector become net-negative in both net-zero
scenarios. By 2050, the net emissions from hydrogen production are -21 MT in
the Global Net-zero Scenario and -25 MT in the Canada Net-zero Scenario.
KEY UNCERTAINTIES
Hydrogen
• Domestic hydrogen markets and infrastructure: The use of
hydrogen as a clean fuel, as projected in our net-zero scenarios,
is currently in the early stages of development. The evolution
of how and where hydrogen is adopted, the cost of production
and end-use technologies, market pricing, and transportation
infrastructure is uncertain. This could lead to different patterns of
adoption than we project.
• Hydrogen exports: There are various proposed projects aimed at
producing hydrogen for export. Our scenarios include varying levels
of hydrogen produced for export as well as associated dedicated
offshore wind generation built to power hydrogen production.
However, export volumes could be different than we assume
depending on how global and domestic markets develop.
107
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORNegative emissions
In most global and Canadian net-zero scenario analyses, net-zero outcomes
include both positive and negative emissions that balance to zero at some point
in the future. For some sources of GHG emissions, eliminating all emissions or
reducing them at a pace sufficient to achieve zero emissions by 2050 may be
very costly or impossible. In both of our net-zero scenarios, we project slightly
positive emissions in 2050 in several sectors, including buildings, heavy industry,
oil and gas, and transportation. These are balanced by negative emissions.
Negative emissions can be realized in several ways, but all aim to remove CO2
from the atmosphere on a permanent or long-term basis.
Nature can act as a carbon sink capable of storing carbon through
natural processes
Managing natural processes to capture and store GHG emissions is often
referred to as nature-based solutions. An example of a nature-based solution is
the federal government’s 2 Billion Trees Commitment, which aims to plant two
billion trees over 10 years to address both climate change and biodiversity loss. KEY TRENDS
Negative emissions
• Negative emissions play a key role in offsetting remaining
emissions from other sectors.
• BECCS, direct air capture, and land use, land-use change and
forestry (LULUCF) all play important roles in reaching net-zero.LULUCF emission reductions are uncertain
We do not model nature-based solutions in EF2023. Instead, we make
assumptions about the emissions and removals from natural processes, which
we account for in our assumptions about land-use, land-use change and forestry
(LULUCF). We describe these assumptions in the previous chapter, Scenarios
and Assumptions. We assume negative emissions from the LULUCF of 50 MT by
2050 in both net-zero scenarios, and 13 MT in the Current Measures Scenario.
However, there is some uncertainty on whether carbon stored through nature-
based solutions will be permanent. Wildfires, infestations from insects like the
pine beetle, or natural decay could release stored carbon and result in reduced
impact from LULUCF in the future. Lower negative emissions from LULUCF
would mean that greater emissions reductions from other sectors, or more
negative emissions from other sources, would be needed to achieve net-zero
emissions.
A second source of negative emissions in both net-zero scenarios is the use of
bioenergy with carbon capture and storage technology (BECCS). We describe
our projections for BECCS in the electricity and hydrogen sections earlier in this
chapter. BECSS delivers negative emissions through the combustion of biomass
such as trees or crop waste to generate electricity, and then uses CCUS to
permanently store the emissions. We project that the use of BECSS results in
around 60 MT of negative emissions in both net-zero scenarios. 108
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORDAC is used to achieve negative emissions in both net-zero scenarios
DAC technology, which we describe in more detail in the following text box,
is another option to achieve negative GHG emissions. In our analysis, we model
DAC based on our assumptions about its costs and the profitability of capturing
CO2 emissions directly from the atmosphere. We assume DAC facilities are
compensated for capturing emissions by emitters who want to offset their
own emissions.
In the Global Net-zero Scenario, we project that DAC facilities begin capturing
emissions in the late 2030s, and by 2050, DAC results in negative emissions of
46 MT. In the Canada Net-zero Scenario, DAC captures 55 MT of emissions by
2050 and in the Current Measures Scenario, no DAC facilities are constructed.
DAC technology requires significant energy to draw in air and separate,
compress and store CO2
There are a variety of DAC processes being tested and commercialized; in our
modeling we assume DAC operations require both electricity and natural gas to
power the process. Emissions from the natural gas used in the process are also
captured and stored. By 2050, energy used to power DAC facilities makes up
4% of all end-use energy consumption in the Global Net-zero Scenario, and 5%
in the Canada Net-zero Scenario.
Figure R.44 shows our assumptions about negative emissions from LULUCF
and the negative emissions resulting from our modeling of BECCS and DAC,
compared to total GHG emissions from the rest of the economy, in the Global
Net-zero Scenario.Figure R.44:
Net emissions, Global Net-zero Scenario
109
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORWhat if direct air capture (DAC) technology matures more quickly and is less costly?
DAC is an emerging technology that extracts CO2 directly from the atmosphere
through a mix of physical and chemical processes. The CO2 can then be injected
and stored in deep geological formations or be used as feedstock for different
products such as synthetic fuels. By removing CO2 directly from the atmosphere,
DAC has the potential to offset emissions from the activities whose emissions are
hardest or most expensive to avoid.
According to a recent report by the IEA on Direct Air Capture, there are 18
small-scale DAC plants operating in the world today, capturing a combined 0.01
MT CO2 per year. Interest in DAC is growing; for example, by late 2024, U.S.
oil producer Occidental Petroleum Corp aims to complete construction of the
world’s largest DAC plant, which could remove up to 1 MT CO2 per year. This is
the largest of a growing list of proposed DAC plants across North America and
Europe.
DAC costs are uncertain, but may fall with time
While existing DAC plants demonstrate the technical feasibility of the technology,
costs remain uncertain. Some estimates put the costs at between US$325
and US$785 per tonne of CO2 captured for a plant built today.21 In comparison,
Canada’s federal backstop carbon price is currently $65 per tonne of CO2e.
DAC deployment will depend on building and operation costs, as well as
prices for emissions captured
As with many emerging technologies, it is possible that DAC costs will fall as
new projects come online. Similarly, a higher price on carbon could present an
incentive to build DAC facilities, either through direct compensation for captured
CO2 or selling offsets to other industries looking to reduce their emissions. The
role of DAC in Canada’s net-zero pathways will depend on the future of climate
policies and the extent to which its costs will decline.In the IEA’s Net Zero Emissions by 2050 Scenario, DAC facilities capture 90 MT
of CO2 by 2030 globally, less than half a percent of the CO2 emissions the IEA
projects to be emitted in that year. This number rises to 980 MT of CO2 in 2050.
Many other international net-zero pathways from other organizations see DAC
taking a larger role in the future. Ultimately, the extent of its deployment will largely
depend on its cost relative to other decarbonization options, as well as the price
DAC facilities receive for emissions they capture.
In EF2023, we rely on assumptions about the cost of DAC, including the cost to
absorb, isolate, transport, and store the CO2. Our projections of DAC in different
scenarios are based on its cost (as discussed in Table A.2) relative to other
decarbonization technologies.
DAC deployment begins in the mid-2030s in the Global Net-zero Scenario
Given those assumptions, and the costs and characteristics of other carbon
removal technologies, we project emission reductions from DAC to increase
to 46 MT by 2050 in the Global Net-zero Scenario. We project most of the
growth in DAC will occur starting in the mid-2030s once the most cost-effective
decarbonization options are exhausted and the cost of DAC technology is lower.
DAC is an emerging and uncertain technology and could play a larger role in
reducing Canada’s emissions to net-zero. In this “What if” analysis, we model the
High DAC Case, where we assume that the cost of DAC falls to 2022$125 per
tonne of CO2 by 2050, compared to 2022$230 per tonne of CO2 in the Global
Net-zero Scenario.
In the High DAC Case, DAC sequesters 85 MT CO2 in 2050, nearly double that
of the Global Net-zero Scenario. Figure R.45 compares the relative importance
of DAC in reducing Canada’s emissions, relative to Canada’s net emissions of
732 MT in 2005.
21 World Resources Institute: 6 Things to Know About Direct Air Capture110
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORGreater use of DAC also impacts the energy system. First, more negative
emissions from DAC means that the pressure to reduce emissions in other
sectors is lower compared to a net-zero scenario with few negative emissions.
Second, DAC processes use a large amount of energy. In the High DAC Case,
more natural gas and electricity is used to operate DAC facilities.
DAC use increases energy demand in the High DAC Case
Figure R.46 shows the difference in energy demand between the High DAC
Case and the Global Net-zero Scenario in 2050. Additional use of DAC increases
natural gas demand by 1.5 Bcf/d (42 106m3/d), and electricity by 3.5 TWh. In the
rest of the economy, more natural gas and other fossil fuels are used in the High
DAC Case in place of some electricity, bioenergy, and hydrogen. The net effect of
these changes is an over 600 PJ increase in energy use by 2050 relative to the
Global Net-zero Scenario, or about a 7% increase.
It is also possible that DAC might be used less than in the Global Net-zero
Scenario. Less negative emissions from DAC would mean achieving net-zero will
require more emission reductions from other parts of the economy. This could
include greater use of electricity, bioenergy and hydrogen-based fuels, additional
nature-based solutions to offset emissions, or a greater need for energy efficiency
and conservation.
DAC could account for an important share of Canada’s overall emission
reductions. With faster technological advancement and increasing adoption, the
High DAC Case shows a pathway where DAC accounts for over one tenth of the
emission reductions required to reach net-zero. It also shows that greater DAC
use could lead to significantly more natural gas and RPP demand than shown in
the Global Net-zero Scenario.Figure R.45:
Negative emissions from DAC, as a % of total GHG emissions in 2005,
all scenarios
Figure R.46:
Difference in energy use between the Global Net-zero Scenario and
High DAC Case in 2050, by fuel
111
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORKEY UNCERTAINTIES
Negative emissions
• Reliance on nature-based solutions: In our analysis, we limited the reliance
on nature-based solutions in order to focus more on the potential energy
technologies available to reach net-zero. However, some recent Canadian
net-zero studies assume higher contributions of land-use change to reach
net-zero.22 The ultimate contribution of these emissions is uncertain and could
be higher or lower than we assumed.
• Direct Air Capture: There is considerable uncertainty around the ability
of DAC to contribute to Canada’s emission reductions. Cost trends could
be significantly higher than we assume in the Global and Canada Net-zero
Scenarios, and lead to different outcomes.
• Balancing remaining emissions with negative offsets: The balance of
negative emissions versus remaining emissions in our scenarios is in line with
other Canadian net-zero studies. If negative emission technologies progress
less quickly than we assume, faster reductions will be needed in other areas
of the economy, potentially involving stronger policy action. On the other hand,
if negative emissions develop faster, it is possible less stringent policies will be
needed to achieve net-zero emissions.
22 The Canadian Climate Institute assumes a land-use contribution of -80 MT by 2030 and -105 MT by 2050, and ECCC’s recent Canada’s Long-Term Strategy Submission to the UNFCCC assumes -100 MT by 2050 in all scenarios.112
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORMacroeconomics
The economy is a key driver of the energy system. Economic growth, industrial
output, inflation, exchange rates, global demand, and population growth all
influence energy supply and demand trends. The way they evolve will have a
direct impact on Canada’s transition towards net-zero.
Figure R.47:
Economic indicators, annual % change from 2019 to 2050, all scenarios
KEY TRENDS
Macroeconomics
• Continued population and economic growth across all scenarios.
• Slightly slower growth in the Global Net-zero and Canada
Net-zero scenarios.The long-term projections for key economic variables are in Figure R.47.
Real (adjusted for inflation) economic growth averages 1.4% per year over the
projection period in the Global Net-zero scenario. Growth is slightly higher in the
Canada Net-zero and Current Measures scenarios, largely driven by stronger oil
and gas prices, production, and export levels. The Canada-US exchange rate
varies across the three scenarios, also related to the large variation in oil and gas
activity and prices.
Economic growth over the projection is generally slower than the historical
average in all three scenarios. Reasons for slower growth include an aging
population and slower global economic growth.
KEY UNCERTAINTIES
Macroeconomics
• Global economic growth: Future global uncertainties, such as
demand for Canadian exports, technology development, and
commodity prices could impact future Canadian economic growth.
This is especially true for the Global Net-zero Scenario, as policies
and technologies used to reduce global emissions could lead to
different macroeconomic outcomes than shown here. Likewise,
geopolitical events, such as the Russian invasion of Ukraine, could
impact future growth trends.
• Impacts of climate change: The three scenarios do not include
macroeconomic estimates of damages related to climate change.
These could significantly reduce economic growth, particularly in
scenarios like Current Measures, where only limited measures to
reduce climate change are included.
• Cost of decarbonization: The net-zero scenarios assume declining
costs for key technologies, such as EVs, heat pumps, electrolyzers,
and DAC. If these cost reductions do not materialize, achieving
net-zero by 2050 could be more costly and involve lower economic
growth than shown here.
113
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORAccess and Explore Energy Future Data
• Figure Data (Excel) – Download the EF2023 figure data.
• Full dataset (Open Gov) – Download all of the EF2023 data at once.
• Data Appendix – Access customizable, downloadable tables arranged by variables.
• Interactive Visualization – Interact and visualize EF2023 data behind long-term energy outlooks.
Student Resources
In partnership with Ingenium, the CER developed educational activities based on Canada’s forecasted energy demand and supply.
Targeted at students between the grades of 9 and 11, the activities encourage students and educators to explore Canada’s energy ecosystem using an interactive tool.
This tool allows users explore how the future of energy in Canada over the long term. The material and student resources are available here.114
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORAbout the CER
The Canada Energy Regulator (CER) works to keep energy moving safely across the country. We review energy development projects and share energy information.
We enforce some of the strictest safety and environmental standards in the world in a manner that respects the Government of Canada’s commitments to the rights of
the Indigenous peoples of Canada. The CER regulates:
• Oil & Gas Pipelines – Construction, operation, and abandonment of interprovincial and international pipelines and related tolls and tariffs.
• Electricity Transmission – Construction and operation of international power lines and designated interprovincial power lines.
• Exports & Energy Markets – Exports of certain energy products; monitoring aspects of energy supply, demand, production, development, and trade.
• Exploration & production – Oil and gas exploration and production activities in the offshore and on frontier lands not covered by an accord.
• Offshore renewables – Offshore renewable projects and offshore power lines.
The Energy Information Program is one of four core CER responsibilities. We collect, monitor, analyze, and publish fact-based information on energy markets and
supply, sources of energy, and the safety and security of pipelines and international power lines. Using tools like interactive pipeline maps and visualizations, we make
complex pipeline and energy market data user-friendly and accessible.
Our Commitment:
• Canadians have access to and use energy information for knowledge, research, and decision-making.
• Canadians have access to community-specific information about CER-regulated pipelines, powerlines, and other energy infrastructure.
• Broader and deeper collaboration with stakeholders and partners informs our energy information.115
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORAbout this Report
The CER’s Energy Information core responsibility is closely linked to its mandate and responsibilities under the Canadian Energy Regulator Act (CER Act), which
includes advising and reporting on energy matters. As well, under Part 7 of the CER Act, the Commission of the CER authorizes the export of natural gas, natural gas
liquids, crude oil and petroleum products, and electricity. The Commission of the CER must not issue an authorization for the export of oil and gas unless it is satisfied
that the quantity to be exported is surplus to Canadian requirements. The CER’s monitoring of energy markets and assessments of Canadian energy requirements and
trends helps support the discharge of its regulatory responsibilities. This report, Canada’s Energy Future 2023: Energy Supply and Demand Projections to 2050, is the
continuation of the Canada’s Energy Future series, and projects long-term Canadian energy supply and demand trends.
EF2023 was prepared by CER technical staff.
Specific questions about the information in this report may be directed to: energyfutures@cer-rec.gc.ca
EF2023 was prepared by CER technical staff under the direction of:
Olivera Blagojevic
Director, Energy Outlooks
Bryce van Sluys
Project Lead
Michael Nadew
Project Manager
Matthew Hansen
Technical Leader, energy demand and emissions
Ganesh Doluweera
Technical Leader, electricity and renewables
Mike Johnson
Technical Leader, hydrocarbon supplyKey contributors by section:
Energy demand
Gabi Diner
Carlos Murillo
Electricity
Eranda Bartholameuz
Michael Nadew
Crude oil
Ryan Safton
Melanie Stogran
Natural Gas and NGLs
Melanie Stogran
Hydrogen
Michael Nadew
Macroeconomics
Kevin Caron116
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORAppendix 1: Domestic Climate Policy Assumptions
Domestic climate policies include laws, regulations, and programs put in place by governments with the goal of reducing GHG emissions. Around 80% of Canada’s
GHG emissions are energy-related, so climate policy aimed at reducing emissions will affect Canada’s energy system. We make assumptions about the climate policies
we model in each scenario in EF2023. This appendix includes additional details about the climate policy assumptions, beyond those included in the Scenarios and
Assumptions chapter.
Federal, provincial, and territorial climate policies that are currently in place are the basis of the Current Measures Scenario. A policy is “in place” if it was enacted prior
to March 2023. We do not include announced policies that are not yet implemented in the Current Measures Scenario.
The Global and Canada Net-zero scenarios include all in-place federal, provincial, and territorial climate policies. Both net-zero scenarios also include all announced
but not-yet-implemented policies, to the extent possible. We applied the following criteria to determine whether an announced policy was included in our net-zero
scenarios:
• The policy was announced prior to March 2023
• Sufficient details exist to model the policy
Final details of some of these policies were not available at the time of analysis. We include these policies by relying on assumptions about them, as necessary.
Table A1.1 provides an overview of all major federal policies included in the three scenarios. Table A2.2 provides an overview of key policies in provinces and territories.
In the Global Net-zero and Canada Net-zero scenarios, if the federal policy is more stringent than its regional equivalent, the federal one is modelled instead.
For an exhaustive review of climate measures in Canada, see Environment and Climate Change Canada’s Fifth Biennial Report on Climate Change,
and Canada’s revised NDC.
All dollar values are given in $2022 Canadian unless otherwise stated.117
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORTable A1.1:
Overview of Major Federal Policies in the Global Net-zero, Canada Net-zero, and Current Measures Scenarios
Policy Description Global Net-zero and Canada Net-zero Scenarios Current Measures Scenario
Backstop carbon
pricingApplies a regulatory charge on fossil fuels at
the end-use level based on the relative GHG
emissions intensity of fuels.The fuel charge rises from $50 per tonne ($50/t) by 2022, then to $140/t ($170/t in nominal dollars,
not adjusted for inflation) by 2030. It remains constant in nominal terms from 2030 to 2050 or $95/t in
inflation-adjusted terms by 2050.
Our modelling assumes most provincial systems follow this schedule, and by 2030 all provinces and
territories match the federal price.
Aggregate cost of
carbonA hypothetical suite of policies, regulations,
and programs in the 2030 to 2050 period
represented by a carbon price that is added
to the backstop carbon pricing.The aggregate cost of carbon is added to the carbon
price backstop in both scenarios.
Global Net-zero Scenario: Starting at $0/t CO2e
(carbon dioxide equivalent) in 2030 and rising to $330
in 2050.
Canada Net-zero Scenario: Starting at $0/t CO2e in
2030 and rising to $380 in 2050.Not included
Output-based pricing
system (OBPS)A performance-based carbon pricing
system for industrial facilities. Applies
the carbon price for every ton of excess
emissions above a specified annual intensity
limit. This system maintains a marginal
incentive for reducing CO2 emissions, but
reduces the average cost of compliance
so industries can maintain international
competitiveness.Global Net-zero Scenario: A 2% yearly tightening rate
on emissions intensity is applied from 2023 to 2030,
followed by a 3% tightening rate until all emissions
are covered in 2050. The backstop carbon price and
aggregate cost of carbon is applied to emissions
above the intensity limit.
Canada Net-zero Scenario: A 2% yearly tightening
rate on emissions intensity is applied from 2023 to
2050. The backstop carbon price and aggregate
cost of carbon is applied to emissions above the
intensity limit. Given that the rest of the world does
not reach net-zero in the Canada Net-zero Scenario,
this trajectory maintains a level of support for trade-
exposed industries.Most industrial sectors are required to reduce
their emissions intensity by 20% relative
to their 2014 to 2016 average from 2020
to 2050. If a facility exceeds the emissions
intensity limit, it must pay the backstop carbon
price on excess emissions or submit eligible
credits. If a facility’s emissions are below the
limit, it receives credits to sell or use later for
compliance.118
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORPolicy Description Global Net-zero and Canada Net-zero Scenarios Current Measures Scenario
Oil and gas emissions
capA cap on emissions from the upstream
oil and gas sector at a pace and scale
necessary to achieve Canada’s goal of net-
zero by 2050, while allowing the sector to
compete in a transitioning global economy.At the time of analysis, the oil and gas emissions
cap was announced but was still in development.
To model the emissions cap, we developed some
simplifying assumptions for modeling purposes.
These assumptions have no bearing on what the final
policy will include.
The cap covers only upstream production sectors
(oil sands, conventional oil production, natural gas
production and processing). It covers all GHG
emissions, including carbon dioxide and methane.
The cap requires a minimum emissions reduction of
31% in total from 2005 from these sectors by 2030.
We allow two years of flex time in meeting the 2030
target to account for the length of time large-scale
infrastructure like carbon capture, utilization, and
storage (CCUS) takes to develop.
The cap declines to a 60% reduction from 2005 by
2040, and net-zero by 2050.
In 2050, we allow the sector to achieve net-zero with
negative emission offsets from direct air capture (DAC)
and/or other net-negative sectors. These are capped
at a maximum of 25 megatonnes (MT) to ensure most
reductions occur within the sector, while also allowing
flexibility for emissions abatement.
The cap is met by a sector-specific aggregate cost of
carbon rising over time.Not included.
Methane regulations
for the upstream oil
and gas sectorOil and gas facilities are required to
reduce their methane emissions either
through adoption of new methane control
technologies or process change.Facilities must reduce their methane emissions by 40-
45% from 2012 levels by 2025 and 75% by 2030.Facilities must reduce their methane emissions
by 40-45% from 2012 levels by 2025.
Investment tax credit
for CCUSA federal investment tax credit for CCUS
projects that permanently store captured
CO2 in geological storage or in concrete.An investment tax credit for capital investments in CCUS. Tax credit is set at 50% of upfront costs for
CCUS. The tax credit for carbon capture is 50% until 2030, 25% from 2031-2040, and 0% onwards.119
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORPolicy Description Global Net-zero and Canada Net-zero Scenarios Current Measures Scenario
Net-zero accelerator
initiative and strategic
innovation fundA federal investment of $3 billion over five
years for the development and adoption
of low-carbon technologies in all industrial
sectors. Budget 2021 provided an
additional $5 billion over seven years for the
Net Zero Accelerator. Development and adoption of low-carbon
technologies in the industrial sector. Examples
include fuel switching to low-carbon heat sources,
adoption of inert anodes, CCUS, replacing fossil fuel
feedstocks, hydrogen-based steel making, and DAC.Examples include fuel switching to low-carbon
heat sources, adoption of inert anodes, and
CCUS.
Clean Electricity
RegulationsThe Clean Electricity Regulations would
establish an emissions performance
standard having an intensity form (i.e., t/
GWh). It would be set at a stringent, near-
zero value in line with direct emissions from
well-performing, low-emitting generation
such as, geothermal or combined cycle
natural gas with CCS. Net-zero electricity generation by 2035 through to
2050. Small generating units and those that produce
electricity for remote communities are excluded from
the regulation.
The full regulatory details of the Clean Electricity
Regulations are still under development. We follow the
details in the Proposed Frame for the Clean Electricity
Regulations. Not included. Electricity generation facilities
are covered under the OBPS.
Phase out of coal-fired
generation of electricityA carbon intensity performance standard for
coal-fired power plants.Limits emissions intensity of existing coal-fired electricity generation to 420 t/CO2e per gigawatt hour
(GWh) by 2030.
National energy code
for buildingsSets out technical requirements for the
energy-efficient design and construction of
new buildings.New buildings are “net-zero energy ready” by 2030
and net-zero by 2050. These codes are still under
development, so we follow modeling in the Emission
Reduction Plan that result in substantial increases in
the efficiency of building shells.Assumes that the 2017 building code applies
throughout the projection period, with
marginal efficiency improvements to building
shells and space conditioning.
Energy Efficiency
RegulationsMinimum energy efficiency standards for
energy-using technologies in the residential,
commercial, and industrial sectors (e.g.
space conditioning equipment, water
heaters, household appliances, lighting).Marginal efficiency gains occur from 2030-2050. Includes Amendment 17 to the Energy
Efficiency Regulations. Energy efficiency gains
end in 2030 and are carried through to 2050.
Hydrofluorocarbon
(HFC) regulationA phase down of HFC consumption from a
baseline.An 85% reduction in consumption of HFCs by 2050 from 2019 levels.120
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORPolicy Description Global Net-zero and Canada Net-zero Scenarios Current Measures Scenario
Zero Emissions Vehicle
(ZEV) mandateA sales mandate for new light-, medium-,
and heavy-duty vehicles that increases in
stringency over time. The ZEV sales target for light-duty vehicles is 20% by
2026, 60% by 2030, and 100% by 2035. Medium-
and heavy-duty sales targets are 35% by 2030 and
100% by 2040, where feasible. At the time of analysis,
these regulations were still under development. We
made the simplifying assumption that 80% of sales
met the threshold of “feasible” by 2040, and over
95% by 2050.Not included. Provincial mandates for ZEV
sales can be found in Table A.1.2
ZEV incentives Major policies include the iZev subsidy
program, the iMHZEV subsidy program,
funding for charging network initiatives, and
tax write-offs for businesses. Vehicle purchase rebates and assumptions on the build-out of infrastructure needed for charging and
refueling ZEVs.
Light-duty vehicle
GHG emissions
standardsNew light-duty vehicles sold in Canada
must meet progressively more stringent
GHG emissions standards. Incorporates LDV-1 (2011-2016) and LDV-2 (2017-2026) Light-duty vehicle GHG emission standards.
In the projection period, new light-duty vehicle fuel economy improves approximately 5% per year to
2026.
Heavy-duty vehicle
GHG emission
standardsNew heavy-duty vehicles sold in Canada
must meet progressively more stringent
GHG emission standards. Incorporates HDV-1 (2014-2018) and HDV-2 (2021-2027) heavy-duty vehicle GHG emission
standards. In the projection period, new heavy-duty vehicle fuel economy improves approximately
2-3% per year to 2027.
Clean fuel regulations Reduction in carbon intensity of gasoline
and diesel over time, through several
mechanisms, including:
supplying low-carbon fuels (e.g. ethanol),
end-use fuel switching in transportation
fuels (e.g. electric and hydrogen vehicles),
and upstream projects (e.g. CCS).Carbon intensity decrease of 12g CO2e/megajoule
(CO2e/MJ) below 2016 levels by 2030. Post 2030, we
make the simplifying assumption that fuels continue
the same rate of decrease (about 1.2g CO2e/MJ
per year). This decrease is modeled as an increasing
share of renewable fuels and increased renewable
natural gas blending, incentivized by the regulation’s
credit creation mechanism.Carbon intensity decrease of 12g CO2e/MJ
below 2016 levels by 2030.
Renewable fuel
regulationsMinimum renewable fuel content for all
regions except for Newfoundland and
Labrador and the Territories.Specifies a minimum renewable fuel content of 5% in gasoline and 2% in diesel fuel sold in Canada by
volume.121
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORPolicy Description Global Net-zero and Canada Net-zero Scenarios Current Measures Scenario
Northern REACHE
programProgram to reduce diesel use for electricity
and heat in remote communities.Increase the market share of alternative technologies.
Fertilizer emissions
reduction targetTarget to reduce greenhouse gas emissions
from fertilizer application in agriculture by
30% below 2020 levels by 20302030 target met, with reductions starting in 2023 and
additional reductions achieved post 2030.Not included.
Proposed municipal
solid waste (MSW)
landfill methane
emissions regulationsProposed approaches for MSW landfills to
help meet Canada’s commitment under the
Global Methane Pledge of reducing global
methane emissions by 30% below 2020
levels by 2030.MSW landfill methane emissions are reduced by
45% below 2020 levels by 2030 (as per federal
government projections), with additional reductions
achieved post-2030.Not included.122
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORRegion Policy Description
British Columbia Zero Emissions Vehicle Act Requires automakers to sell a minimum share of zero- or low-emission vehicles via a
credit market. Achieves 10% light-duty zero-emission vehicles sales by 2025, 30% by
2030, and 100% by 2040.
CleanBC Go Electric Program Incentives for electric vehicles and charging station installation. Includes rebates for light-
duty vehicles of up to $3,000 and up to 50% of charger installations.
CleanBC Industry Fund Government investment into low-emission technologies using a portion of carbon pricing
revenue above $30/tCO2e to support competitiveness in industry.
CleanBC Better Homes and Better Buildings
programIncentives for residential and commercial building efficiency improvements.
Energy Efficiency Act Sets energy efficiency performance standards for energy-using technologies.
Low Carbon Fuel Standard Requires a decrease in the average carbon intensity of 30% by 2030 from 2020 for
transport fuels through several compliance pathways.
Renewable Fuel Regulation A minimum renewable fuel content of 5% ethanol for gasoline and 3% biodiesel for
diesel fuel.
Renewable Natural Gas Regulation Requires that 15% of natural gas consumption be provided by renewable natural gas
by 2030. Table A1.2
Overview of the major provincial policies included in all three scenarios23
23 In the Global Net-zero and Canada Net-zero scenarios, if the federal policy is more stringent than its regional equivalent, the federal one is modelled instead.123
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORRegion Policy Description
Alberta Renewable Fuels Standard (RFS) Requires renewable fuels to be blended into gasoline and diesel fuel.
CCUS investments Investments in CCUS projects, including the Alberta Carbon Trunk Line and Quest
projects.
Methane emissions reduction regulation Requires the reduction of methane emissions from oil and gas operations by 45% by
2025 relative to 2014 levels.
Saskatchewan Ethanol Fuel Regulations and Renewable Diesel Act Regulations requiring a minimum of 7.5% of ethanol content in gasoline and 2% biodiesel
content in diesel.
Methane Action Plan Requires the reduction of methane emissions from oil and gas operations by 45% by
2025 relative to 2015 levels.
Manitoba Biofuels Mandate amendment Regulations requiring a minimum of 10% ethanol content in gasoline and 2% biodiesel
content in diesel.
Efficiency Manitoba Act Rebates and other incentives on lighting, air conditioning, and building shell rebates
across residential, commercial, and some industrial sectors.
Green Energy Equipment tax credit A 15% tax credit on geothermal heat pumps in residential and commercial sectors.
Ontario Cleaner Transportation Fuels: Renewable content
requirements for gasoline and diesel fuelsA regulation requiring 15% ethanol content in gasoline and 4% biodiesel content in diesel
by 2030.124
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORRegion Policy Description
Quebec Western Climate Initiative cap-and-trade regime A cap-and-trade system for industrial and electricity sectors, as well as fossil fuel
distributors. Declining annual caps are set out to 2030 and the revenue generated by the
policy is invested in low-carbon technologies. As caps are not set after 2030, the federal
pricing systems (fuel charge and OBPS) apply.
Renewable Natural Gas Regulation Minimum 5% renewable natural gas content in natural gas by 2025.
Chauffez Vert Program Rebates for residential renewable energy space or water heating systems, if replacing
fossil fuel system.
Roulez Vert Program Incentives for electric vehicles and charging station installations. Rebates include up to
$8,000 for new vehicles and $600 for home charging stations.
Zero Emissions vehicle standard Requires automakers to sell a minimum share of zero- or low-emission vehicles via a
credit market. The credit target is 100% by 2035.
New Brunswick Energy Efficiency programs Provides purchase incentives for energy efficient appliances in residential, commercial,
and industrial sectors.
Nova Scotia EfficiencyNS Programs Incentives for residential, commercial, transportation and some industrial sectors.
Incentives include the transition from oil heating to electric, heat pumps, and charging
stations.
Newfoundland and
LabradorEnergy Efficiency Programs Incentives for residential, commercial, and some industrial sectors. These programs
include a home energy savings program, heat pump rebates, and commercial sector
rebates for select appliances.125
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORRegion Policy Description
Prince Edward Island EfficiencyPEI Rebates Incentives for residential, commercial, and some industrial sectors. Various rebates on
energy-efficient appliances, such as heat pumps, solar systems, biomass heating, and
fuel-efficient furnaces.
Northwest Territories 2030 Energy Strategy Measures that aim to support low-carbon energy for transportation and space heating.
Includes promoting the use of wood as an alternative source of energy to fossil fuels,
supporting the development and implementation of community energy plans, incentives
for energy efficiency and alternative energy projects, support for alternatives to diesel
electricity generators, rebates for zero- and low-emission vehicles.
Yukon Our Clean Future Measures including 10% ZEV new sales by 2025 and 30% by 2030, ZEV rebates,
blending of renewable fuels into diesel and gasoline, energy efficiency incentives and
regulations, and renewable energy projects for remote communities.126
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORAppendix 2: Technology Assumptions
This appendix outlines key technology assumptions included in the Current Measures, Global Net-zero, and Canada Net-zero Scenarios. The percent changes in the
assumptions are relative to 2021 unless otherwise noted. All costs are in $2022 CAD unless otherwise noted.
Table A2.1
Key Technology Assumptions
Global Net-zero Canada Net-zero Current Measures
Buildings
Heat pumps(a)Cost declines 15% by 2030 and
40% by 2050.Cost declines 13% by 2030 and
34% by 2050.Cost declines 7% by 2030 and 20% by 2050.
Building shell* Efficiency of new buildings
improves 80% by 2050. Efficiency of new buildings
improves 80% by 2050.Efficiency of new buildings varies regionally from 20-50% by 2050.
Hydrogen and renewable
natural gas (RNG) blending Hydrogen: Maximum blending of 20% by volume, which occurs
where economics are favourable.
RNG: feedstock supply constraints limit blending up to 10-15% of
natural gas content by 2050. Hydrogen price remains high and thus no blending occurs.
RNG: only provinces with RNG mandates.
Heavy industry
Carbon capture, utilization, and
storage (CCUS) (b)Capture costs are different by industry and range from $45-200/
tCO2 by 2030 and $30-160/tCO2 from 2030-2050.Capture costs are different by industry and range from $45-200/
tCO2 through the projection period.
Iron and steel: electric arc
furnaces (EAF) Some facilities transition from coal to EAF(c) and from coal to direct reduced iron EAF.(d)
Hydrogen in steel production:
Hydrogen direct reduced Iron
(H2-Dri)(e) Assume availability of technology at scale and adoption of
economic conditions allow.Assume technology is not available at scale.
Aluminum production: Inert
anodes(f) 20% adoption by 2030 and a linear incline to 100% by 2050. 20% adoption of inert anodes. 127
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORHydrogen and renewable natural
gas blending Hydrogen: Maximum blending of 20% by volume, blending occurs
where economics are favourable.
RNG: supply constraints limit blending up to 10-15% of natural gas
content by 2050. Hydrogen price remains too high for blending to occur.
RNG: only provinces with RNG mandates.
Transportation
Passenger battery electric
vehicles(g) Vehicle cost declines from by
30% by 2030 and 38% by
2050 (compared to $40-60,000
currently).Vehicle cost declines 28% by
2030 and 36% by 2050.Vehicle cost declines 26% by 2030 and 33% by 2050.
Medium and heavy-duty
hydrogen fuel cell trucks(h)Fuel cell truck costs fall steadily, approaching parity with diesel
vehicles in the 2035-2050 period (approximately $150,000 to
$200,000 for a Class 8 diesel truck).Fuel Cell truck costs remain near current levels.
Medium and heavy-duty battery
electric trucks(i)Battery electric truck costs fall steadily, approaching parity with
diesel vehicles in the 2035-2050 period (approximately $150,000 to
$200,000 for a Class 8 diesel truck).Battery electric and fuel cell truck costs remain near current levels.
Sustainable aviation fuel(j)Following IEA WEO international context, 40% of jet fuel needs met
with bioenergy, 30% with hydrogen-based aviation fuel by 2050.Not included.
Electricity Generation
Wind electricity(k)Capital cost declines from
$1,900/kW in 2020 to $1,752/
kW by 2030 and $1,630/kW by
2050 (14% below 2020).Capital cost declines from
$1,900/kW in 2020 to $1,763/
kW by 2030 and $1,668/kW by
2050 (12% below 2020). Capital cost declines from $1,900/kW in 2020 to $1,791/kW by
2030 and $1,736/kW by 2050 (9% below 2020).
Solar electricity(l) Capital cost declines from
$1,400/kW in 2020 to $790/kW
by 2030 and $535/kW by 2050
(62% below 2020). Capital cost declines from
$1,400/kW in 2020 to $840/kW
by 2030 and $585/kW by 2050
(58% below 2020).Capital cost declines from $1,400/kW in 2020 to $905/kW by 2030
and $675/kW by 2050 (52% below 2020).
Battery storage (4 hr) (m) Capital cost declines from
$2,198/kW in 2020 to $952/kW
by 2030 and $549/kW by 2050
(75% below 2020).Capital cost declines from
$2,198/kW in 2020 to $1,261/
kW by 2030 and $925/kW by
2050 (58% below 2020). Capital cost declines from $2,198/kW in 2020 to $1,563/kW by
2030 and $1,506/kW by 2050 (32% below 2020).128
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORNatural gas combined cycle with
CCS(n) Capital cost declines from
$3,705/kW in 2020 to $2,625/
kW by 2030 and $2,075/kW by
2050 (44% below 2020).Capital cost declines from
$3,705/kW in 2020 to $3,005/
kW by 2030 and $2,530/kW by
2050 (32% below 2020). Capital cost declines from $3,705/kW in 2020 to $3,385/kW by
2030 and $2,990/kW by 2050 (19% below 2020).
Nuclear small modular reactors(o) Capital cost declines from
$9,262/kW in 2020 to $8,348/
kW by 2030 and $6,519/kW by
2050 (30% below 2020).Capital cost declines from
$9,262/kW in 2020 to $8,348/
kW by 2030 and $6,519/kW by
2050 (30% below 2020). Capital cost declines from $9,262/kW in 2020 to $8,595/kW by
2030 and $7,400/kW by 2050 (20% below 2020).
Oil and Gas Production
Carbon capture, utilization, and
storage(p)Capture costs range from $45-125/tCO2 by 2030 and $30-90/tCO2 from 2030-2050.
Oil sands process efficiency Oil sands process efficiency improves by 1% per year.
Hydrogen
Electrolyzer(q)Capital cost declines 80% by
2030 and 84% by 2050.Capital cost declines 74% by
2030 and 82% by 2050.Capital cost declines 62% by 2030 and 70% by 2050.
Natural gas with CCUS Capital cost declines 25% by 2030 and 40% by 2050. Capital cost declines 20% by 2030 and 25% by 2050.
Biomass Capital cost declines 18% by 2030 and 25% by 2050. Capital cost declines 16% by 2030 and 20% by 2050.
Transportation and distribution of
hydrogenWe assume appropriate transmission and distribution networks gets built to safely and reliably transport hydrogen from producers to
consumers, to enable hydrogen adoption throughout the energy system.
Carbon Management and Non-energy GHG Emissions
Direct air capture(r)Capture cost declines to $330/
tCO2 by 2035 and $230/tCO2 by
2050.Capture cost declines to $350/
tCO2 by 2035 and $250/tCO2
by 2050.Capture cost remains at $400 to $450/tCO2 over the projection
period.
Land-use, land-use change, and
forestry (LULUCF)(s)30 and 50 million tonnes of carbon dioxide equivalent (Mt of CO2e)
removed by 2030 and 2050, respectively. This assumption is based
on a literature review of other Canadian net-zero projections and
on the feasibility of nature-based climate solutions in Canada,
including an on Nature-Based Climate Solutions from the Council
of Canadian Academies.13 megatonnes (MT) of CO2e removed by 2030 and kept at same
level to 2050. Consistent with recent projections from Environment
and Climate Change Canada (ECCC).129
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORWaste(t)Assumes GHG emissions from solid waste disposal are reduced by
45% below 2020 levels by 2030, in line with the estimated impact
of proposed landfill methane regulations. Assumes additional
reductions are achieved by 2050 to a level of 57% below 2020
levels via other waste diversion and reduction measures.Waste and GHG emissions generation intensity factors follow
historical 2001 to 2021 trends for 2022 to 2050, based on the 2023
national inventory report (NIR) data.
Non-energy agriculture(u) GHG emissions intensity of enteric fermentation,* manure
management, and agricultural soils activities declines as of 2023
to a conservative average of 23% below current measures’ levels
in 2050, based on a review of the literature. Also assumes the
Government of Canada’s fertilizer emissions reduction target of
30% below 2020 levels by 2030 is met, then increases linearly to a
40% reduction by 2040 and 50% by 2050. Animal and crop production activities’ GHG emissions intensity
factors follow historical 2001 to 2021 trends for 2022 to 2050 if
negative (based on 2023 NIR 2023 data), or decline at 0.25%/yr.
Sources and notes:
a. IEA World Energy Outlook 2022, NREL Electrification Futures Study .
b. Various sources including: Global CCS Institute, Leeson et al 2017, International CCS Knowledge Centre, IEA Levelized cost of CO2 capture.
c. For an example of coal to EAF see Algoma Steel.
d. For an example of coal to direct reduced iron EAF see ArcelorMittal Dofasco.
e. IEA Clean Energy Technology Guide.
f. For an example of intert anodes see Elysis Carbon-Free Aluminum Facility .
g. IEA World Energy Outlook 2022, EIA Annual Energy Outlook 2022.
h. EPRI US-REGEN Documentation Version 2021 LCRI, On-Road Fleet Vehicles.
i. EPRI US-REGEN Documentation Version 2021 LCRI, On-Road Fleet Vehicles.
j. IEA World Energy Outlook 2022, Canada’s Aviation Climate Action Plan.
k. NREL Annual Technology Baseline, IEA World Energy Outlook 2022.
l. NREL Annual Technology Baseline, IEA World Energy Outlook 2022.
m. NREL Annual Technology Baseline, IEA World Energy Outlook 2022.130
CANADA'S ENERGY FUTURE 2023 – CANADA ENERGY REGULATORn. NREL Annual Technology Baseline, IEA World Energy Outlook 2022.
o. NRCan 2020, NREL Annual Technology Baseline.
p. Various sources including: Global CCS Institute, Leeson et al 2017, International CCS Knowledge Centre, IEA Levelized cost of CO2 capture, Quest Carbon
Capture and Storage Project: Annual Report, Ordorica-Garcia, et al 2011.
q. IEA World Energy Outlook 2022.
r. EPRI US-REGEN Documentation Version 2021 LCRI, IEA Direct Air Capture 2022.
s. Canada’ s 8th National Communication and 5th Biennial Report 2022, Canada’s LTS submission to the UNFCCC 2022, CCA NBCS 2022, Drever et al. 2021,
Smith 2020.
t. Canada’s 8th National Communication and 5th Biennial Report 2022, Canada’s 2030 emissions reduction plan, Chapter 3 2022.
u. McKinsey, Agriculture and climate change 2020, RBC, The Next Green Revolution 2022, SPI, NZ: Implications for Canadian Agriculture 2021, Trottier, Canadian
Energy Outlook 2021.© His Majesty the King in Right of Canada as represented by the Canada Energy Regulator 2023
www .cer-rec .gc .ca/energyfutures
